Notes on the profit and loss account
1. Interest income
Interest income from and outside the euro area totalled EUR 723.7 million. Of this, EUR 117.6 million consisted of foreign currency-denominated interest income and EUR 606.1 million of euro-denominated interest income.
The interest rate on overnight deposits was negative throughout the year, which means that interest has been charged on central bank deposits. This negative interest accrues on both overnight deposits and minimum reserve deposits in excess of the minimum reserve requirements.
ESCB items – claims equivalent to the transfer of foreign reserves to the ECB, claims and liabilities relating to the ECB’s share of euro banknotes and to the application and adjustment of the ECB capital key, as well as TARGET2 balances – are remunerated at the interest rate on the main refinancing operations (MRO). Since the MRO rate was 0% throughout 2018, no interest income was earned from ESCB items.
|Foreign currency-denominated interest income received outside the euro area (EUR m)||2018||2017||Change|
|Non-euro area coupon bonds||89.3||69.5||19.8|
|Non-euro area discount papers||0.7||1.0||-0.4|
|Non-euro area deposits||1.8||0.8||1.0|
|Euro-denominated interest income received outside the euro area (EUR m)||2018||2017||Change|
|Non-euro area coupon bonds||0.8||1.1||-0.3|
|Non-euro area discount papers||–||–||–|
|Non-euro area deposits||0.5||3.0||-2.5|
|Foreign currency-denominated interest income received from the euro area (EUR m)||2018||2017||Change|
|Euro area coupon bonds||9.6||9.0||0.6|
|Euro area discount papers||–||–||–|
|Euro area deposits||0.1||0.1||0.0|
|Euro-denominated interest income received from the euro area (EUR m)||2018||2017||Change|
|Euro area coupon bonds||-2.9||-6.3||3.3|
|Euro area discount papers||-3.7||-9.1||5.3|
|Euro area deposits||0.7||1.9||-1.2|
|Dividends on euro-denominated investments||15.2||8.2||6.9|
|Interest income from monetary policy lending||–||0.0||0.0|
|Interest income from monetary policy securities||200.9||154.2||46.7|
|Interest income from negative interest rates on credit institutions' deposits||380.0||364.2||15.8|
|Total interest income (EUR m)||2018||2017||Change|
|Foreign currency-denominated interest income received outside the euro area||107.9||80.0||27.9|
|Euro-denominated interest income received outside the euro area||9.5||9.9||-0.4|
|Foreign currency-denominated interest income received from the euro area||9.7||9.1||0.6|
|Euro-denominated interest income received from the euro area||596.6||518.2||78.4|
2. Interest expenses
|Foreign currency-denominated interest expenses paid outside the euro area (EUR m)||2018||2017||Change|
|Non-euro area deposits||-0,0||-0,1||0.1|
|Euro-denominated interest expenses paid outside the euro area (EUR m)||2018||2017||Change|
|Non-euro area deposits||-0.4||-2.7||2.3|
|Euro-denominated interest expenses paid in the euro area (EUR m)||2018||2017||Change|
|Monetary policy items||-11.6||-37.8||26.2|
|Total interest expenses (EUR m)||2018||2017||Change|
|Foreign currency-denominated interest expenses paid outside the euro area||-13.4||-7.2||-6.1|
|Euro-denominated interest expenses paid outside the euro area||-0.7||-3.1||2.4|
|Euro-denominated interest expenses paid in the euro area||-13.0||-39.8||26.9|
3. Net interest income
|31 Dec 2018||31 Dec 2017|
|Net interest income||EUR m||EUR m|
|Monetary policy items||580.9||518.4|
|Monetary policy items||-11.6||-37.8|
|NET INTEREST INCOME||696.7||567.1|
4. Foreign exchange rate differences
This item includes realised exchange rate gains and losses arising from the sale of currency positions. In 2018, gains related to exchange rate movements amounted to EUR 11.3 million.
5.Securities price differences
This item includes realised gains and losses arising from the sale of securities. In 2018, the realised losses related to securities price movements totalled EUR –90.3 million, of which EUR –68.9 million was due to a sale of a security in the CSPP portfolio. A provision against the related sales loss was established in connection with the financial statements 2017. In accordance with Article 32.4 of the ESCB statute, the loss is shared by the NCBs of participating Member States in proportion to their subscribed capital key shares in the ECB prevailing in 2017. The Bank of Finland’s share of the loss is EUR 1.2 million (see ‘Provisions’ in the notes on the balance sheet and ‘Provision against losses in monetary policy operations’ in the notes on the profit and loss account).
6. Valuation losses related to currencies and securities
This item consists of valuation losses related to currencies and securities. Each security type and currency is treated separately. There were no valuation losses related to currencies in 2018. Valuation losses related to securities amounted to EUR 30.9 million.
7. Change in foreign exchange rate and price difference provision
Realised net losses arising from foreign exchange rate and price differences, totalling EUR 41.1 million, were covered by reducing the foreign exchange rate and price difference provision in accordance with the accounting conventions. All provisions have been specified in the notes on the balance sheet under liabilities.
8. Income and expenses on fees and commissions
The item includes fees and commissions related to investment activities
9. Net result of pooling of monetary income
|Monetary income||31 Dec 2018||31 Dec 2017|
|EUR m||EUR m|
|Net monetary income pooled by the Bank of Finland||450.9||-456.5|
|Net monetary income allocated to the Bank of Finland||217.9||192.6|
|Net monetary income according to the capital allocation key||-233.0||-263.9|
|Corrections to monetary income reallocation of previous years||-9.0||-0.1|
The amount of each Eurosystem NCB’s monetary income is determined by measuring the annual income that derives from the earmarkable assets held against its liability base. The liability base consists mainly of the following items: banknotes in circulation; liabilities to euro area credit institutions related to monetary policy operations denominated in euro; intra-Eurosystem liabilities of the NCBs arising from the issuance of ECB debt certificates; net intra-Eurosystem liabilities resulting from TARGET2 transactions; net intra-Eurosystem liabilities related to the allocation of euro banknotes within the Eurosystem; accrued interest recorded at quarter-end by each NCB on monetary policy liabilities the maturity of which is one year or longer; liabilities vis-à-vis the ECB backing the claim in relation to swap agreements that earn net income for the Eurosystem. Any interest paid on liabilities included within the liability base is to be deducted from the monetary income to be pooled.
The earmarkable assets consist mainly of the following items: lending to euro area credit institutions related to monetary policy operations denominated in euro; securities held for monetary policy purposes; intra-Eurosystem claims equivalent to the transfer of foreign reserve assets to the ECB; net intra-Eurosystem claims resulting from TARGET2 transactions; net intra-Eurosystem claims related to the allocation of euro banknotes within the Eurosystem; claims on euro area counterparties related to swap agreements between the ECB and non-Eurosystem central banks that earn net income for the Eurosystem; accrued interest recorded at quarter-end by each NCB on monetary policy assets the maturity of which is one year or longer; a limited amount of each NCB’s gold holdings in proportion to each NCB’s capital key share.
The amount of each NCB’s monetary income shall be determined by measuring the actual income that derives from the earmarkable assets recorded in its books. As an exception to this, gold is considered to generate no income and the following are considered to generate income at the latest available marginal interest rate used by the Eurosystem in its tenders for main refinancing operations: (i) securities held for monetary policy purposes under Decision ECB/2009/16 of 2 July 2009 on the implementation of the covered bond purchase programme, (ii) securities held for monetary policy purposes under Decision ECB/2011/17 of 3 November 2011 on the implementation of the second covered bond purchase programme and (iii) debt instruments issued by central, regional and local governments and recognised agencies and substitute debt instruments issued by public non-financial corporations under Decision ECB/2015/10 of 4 March 2015 on the implementation of a secondary markets public sector asset purchase programme. Where the value of a NCB’s earmarkable assets exceeds or falls short of the value of its liability base, the difference shall be offset by applying to the value of the difference the latest available marginal rate for the Eurosystem’s main refinancing operations.
The monetary income pooled by the Eurosystem is to be allocated among the NCBs according to the subscribed ECB capital key. The difference between the monetary income pooled by the Bank of Finland amounting to EUR 450.9 million and reallocated to the Bank of Finland amounting to EUR 217.9 million is the net result arising from the calculation of monetary income.
10. Provision against losses in monetary policy operations
This item contains the Bank of Finland’s share in the provision against losses in monetary policy operations, which was established in relation to a security held by an NCB of the Eurosystem in its CSPP portfolio. This item also contains the Bank of Finland’s share in the realised loss in relation to the sale in 2018 of a security held by the Bank of Finland in its CSPP portfolio, as well as the dissolving of the provision established in 2017 against losses in monetary policy operations (see ‘Provisions’ in the notes on the balance sheet and ‘Securities price differences’ in the notes on the profit and loss account).
11. Share in ECB profit
The ECB distributed EUR 287 million profit for the financial year 2017, of which the Bank of Finland’s share recorded for the financial year 2018 totalled EUR 5.1 million.
12. Income from other equity shares and participating interests
This item includes the Bank of Finland’s share, EUR 21.3 million, in income on the SMP- and APP-related portfolios distributed by the ECB in the form of interim profit distribution for the financial year 2018. The item also includes dividends received on shares in the BIS, EUR 3.0 million, and income on real estate funds, EUR 0.4 million.
13. Other income
This item consists of the Financial Supervisory Authority’s supervision and processing fees, EUR 27.8 million. The item also includes income from real estate, EUR 5.6 million, and commissions and fees.
14. Staff costs
|Staff costs||31 Dec 2018||31 Dec 2017|
|EUR m||EUR m|
|Salaries and fees||39.4||36.7|
|Employer's contributions to the pension fund||7.6||7.4|
|Other staff-related costs||1.0||2.9|
|Average staff size||2018||2017|
|Number of staff||Number of staff|
|Bank of Finland||356||365|
|Financial Supervisory Authority||194||181|
|Basic salaries paid to the members of the Board||EUR|
|Erkki Liikanen (until 11 July 2018)||241,734|
|Tuomas Välimäki (from 2 July 2018)||92,171|
Fringe benefits (meal benefits, company-paid telephone and company car) paid to the members of the Board totalled EUR 26,877.
Pension benefits of the members of the Board are determined according to the Bank of Finland’s Pension Rule, without special terms and under same terms and conditions as confirmed in the Rule for other personnel. As applicable, the Bank of Finland’s Pension Rule is in line with the State Employees’ Pension Scheme. A former board member may be paid compensation for income loss if the person may not, because of qualifying period provisions, accept employment from elsewhere or if the pension from the Bank of Finland is less than the compensation for income loss. Full compensation for income loss amounts to 60% of salary and is paid for one year, adjusted with the pension paid by the Bank, so that the sum of full compensation and pension does not exceed 60% of salary.
15. Pension fund contribution
Approved by the Parliamentary Supervisory Council, the Bank of Finland paid a contribution of EUR 10 million to the Bank’s pension fund in 2018 to cover the pension fund’s deficit for the financial year.
16. Administrative expenses
|EUR m||EUR m|
|Supplies and purchases||0.5||0.5|
|Machinery and equipment||6.8||6.8|
|Purchase of services||12.6||10.2|
This item includes rents, meetings and interest group-related costs, expenses arising from the purchase of services and cost of equipment. Expenses involved in training, travel and recruitment of staff are also recorded under this item.
17. Depreciation of fixed assets
|Depreciation of tangible fixed assets||31 Dec 2018||31 Dec 2017|
|EUR m||EUR m|
|Machinery and equipment||3.0||3.1|
|Depreciation of intangible fixed assets||31 Dec 2018||31 Dec 2017|
|EUR m||EUR m|
18. Banknote production services
Costs related to banknote production services totalled EUR 2.1 million.
19. Other expenses
The bulk of other expenses is related to the use and maintenance of property.
20. Income of the pension fund
This item includes the Bank of Finland’s and Financial Supervisory Authority’s employer contributions and employee’s share of premium income, EUR 10.4 million, as well as a contribution of EUR 10 million paid by the Bank to cover the pension fund’s deficit for the financial year. Income from the pension fund’s real estate, EUR 1.6 million, is also recorded under this item.
21. Expenses of the pension fund
This item includes pensions paid, EUR 27.8 million, the Bank of Finland pension fund’s management costs and depreciation of the pension fund’s fixed assets.
22. Changes in provisions
This item includes the increase of the provision against real value loss, EUR 55 million, and the increase of the general provision, EUR 50 million. All provisions have been specified in the notes on the balance sheet under liabilities.
23. Profit for the financial year
The profit for the financial year 2018 totalled EUR 230.3 million. The Board proposes to the Parliamentary Supervisory Council that EUR 143.0 million of the profit be made available for the needs of the State.