The Bank of Finland’s audited profit for the financial year 2022 totals EUR 0.00 after adjustments to provisions. The foreign exchange rate and price difference provision was adjusted downwards by EUR 165 million to cover the valuation losses on financial assets arising mainly from the fall in the market value of dollar-denominated securities. A reduction of EUR 47 million in the general provision was also made, to cover the negative operating profit.
The rise in interest rates has reduced the Bank of Finland’s profit. The Bank had already prepared for higher interest rates by strengthening its risk provisions when interest rates were low. In the immediate years ahead, there will be a further need to use risk provisions, as the profit outlook is weak.
During the COVID-19 crisis, the Eurosystem expanded asset purchases and granted longer term, favourable loans to banks. This further boosted the Bank of Finland’s balance sheet. A central bank’s financial result reflects the particular central banking tasks it has had to undertake, and making a profit is not the primary goal of its activities.
The Bank of Finland has acquired bonds through the asset purchase programmes, and a considerable proportion of these are issued by Finland’s public sector, and are long-term and fixed-rate. They have been financed using liquidity deposits of commercial banks, which are remunerated at the European Central Bank’s deposit facility rate. The different interest rate linkage for assets and liabilities poses a structural interest rate risk for the Bank of Finland’s balance sheet.
In 2022, the ECB began a series of interest rate hikes because of the excessively high level of inflation. This has increased the interest payments payable on commercial banks’ deposits and has therefore directly reduced the Bank of Finland’s net interest income. The net interest income in 2022 amounted to EUR 459 million, which was almost EUR 200 million less than in 2021.