Interest paid on central bank deposits weakened Bank of Finland’s operating profit as in previous year

The Bank of Finland’s audited profit for the financial year 2024 totals EUR 0.00 after reductions in provisions (2023 profit: EUR 0.00). The Bank’s operating loss for 2024, EUR -1,027 million, was covered by using in full the remaining general provision and making a reduction of EUR 241 million in the provision against real value loss. The Bank of Finland’s operating loss is a reflection of the monetary policy operations undertaken by the Bank to maintain price stability in accordance with its mandate.

“The interest paid on central bank deposits considerably weakened the Bank of Finland’s operating profit for 2024, causing the Bank to reduce its provisions so as to cover the interest expenses. The Bank’s capital remained strong,” says Deputy Governor of the Bank of Finland Marja Nykänen.

The European Central Bank (ECB) started raising interest rates in 2022 in order to reduce the rate of inflation. Interest rate increases continued until September 2023, when the ECB’s deposit facility rate was at a high of 4.0%. Interest rates began to be lowered in June 2024, but there was only time for these reductions to have a minor impact on the full year’s average deposit facility rate, which was 3.73%.

In 2024, the Bank of Finland’s balance sheet holdings of monetary policy-related securities, which are mainly Finnish government bonds, decreased from EUR 90 billion to EUR 82 billion. Although new purchases are no longer being made, these bonds will remain on the balance sheets of the Bank of Finland and other euro area national central banks for a considerable time, because they are long-term bonds. The purchasing of these bonds created liquidity, and this then led to an increase in deposits by commercial banks with the central bank. The differences in the extent to which the Bank of Finland’s assets and liabilities are subject to fixed or variable interest rates poses a structural interest rate risk for its balance sheet, and, with the earlier interest rate increases, this risk has materialised as expected.

As a consequence of the interest rate increases, the amount of interest paid on the deposits of commercial banks during the financial year 2024 was EUR -3,697 million, which exceeds the Bank’s income from assets. Net interest income in 2024 was EUR -1,108 million, which was EUR 64 million less than in 2023.

The figure for central banking profit was EUR -937 million in 2024 (2023: EUR -1,027 million), and includes both interest income on the Bank of Finland’s financial assets and the Bank’s share of net interest income from the Eurosystem’s monetary policy operations. The operating expenses and income of the Bank of Finland and the Financial Supervisory Authority (FIN-FSA), excluding banknote production services and the pension fund contribution, amounted to EUR -73 million (2023: EUR -70 million).

The Bank of Finland’s financial statements, which also include the income and expenses of the FIN-FSA, have been published in Finnish today, 28 March 2025, on the Bank of Finland website. The Swedish and English versions will be published in April.

Bank of Finland Annual Report 2024 (in Finnish)

In a blog post (in Finnish), Head of Risk Control and Financial Accounting Antti Nurminen writes about how the Bank of Finland’s financial result is arrived.