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For the period ended March 31, 2024, unaudited

Context of the Quarterly Financial Report

The Bank of Canada is the nation’s central bank. The Bank’s mandate under the Bank of Canada Act is to promote the economic and financial welfare of Canada. Its activities and operations are undertaken in support of this mandate and not with the objective of generating revenue or profit. The Bank is committed to keeping Canadians informed about its policies, activities and operations.

This report has been prepared in accordance with section 131.1 of the Financial Administration Act and follows the guidance outlined in the Treasury Board of Canada’s Directive on Accounting Standards: GC 5200 Crown Corporations Quarterly Financial Report. Bank management is responsible for the preparation of the report, which was approved by the Audit and Finance Committee of the Board of Directors on May 22, 2024.

This Quarterly Financial Report should be read in conjunction with the condensed interim financial statements for the first quarter of 2024 included in this publication and with the Bank’s Annual Report 2023. Disclosures and information in the Annual Report apply to the current quarter unless otherwise updated in this quarterly report.

Supporting the economy and the financial system

Since the onset of the COVID‑19 pandemic, the Bank has used extraordinary measures to restore the proper functioning of financial markets and support the economic recovery. In response to high inflation following the reopening of the Canadian economy, the Bank rapidly raised its policy rate and undertook quantitative tightening, in which maturing bond holdings are not being replaced. Refer to the Bank’s website for more information on these measures, including the relevant press releases and market notices.

Managing the balance sheet

Financial position
(in millions of Canadian dollars)
As at March 31, 2024  December 31, 2023 March 31, 2023
Loans and receivables
Investments 280,205  292,341  354,909 
Derivatives—indemnity agreements with the Government of Canada 25,592  23,406  26,283 
All other assets* 1,109  1,023  1,131 
Total assets 306,915  316,776  382,327 
Liabilities and deficiency
Bank notes in circulation 114,814  119,430  114,691 
Deposits 194,166  196,212  253,478 
Securities sold under repurchase agreements 4,265  6,638  15,485 
Other liabilities 330  342  305 
Deficiency (6,660) (5,846) (1,632)
Total liabilities and deficiency 306,915  316,776  382,327 

* All other assets includes Cash and foreign deposits, Capital assets and Other assets.

The Bank’s holdings of financial assets stem from its unique role as the exclusive issuer of Canadian bank notes and its activities related to monetary policy and the financial system. The total value of assets on the Bank’s balance sheet has declined due to the Bank’s quantitative tightening measures, which were put in place after market conditions and economic performance improved. The Bank’s total assets decreased by 3% to $306,915 million as at March 31, 2024, compared with their value as at December 31, 2023. The main driver of this decline was the maturity of investments.

Investments decreased by 4% compared with December 31, 2023, to $280,205 million as at March 31, 2024. This decrease was driven mainly by the following movements within the Bank’s holdings:

  • Government of Canada securities, which include nominal bonds and real return bonds, decreased by $9,519 million during the first three months of the year. This decline is mainly due to the bonds maturing. This resulted in a decline of $6,750 million in Government of Canada bonds held at fair value and a decline of $2,769 million in Government of Canada bonds held at amortized cost.
  • The Bank engages in repo operations, which provide market participants with a temporary source of Government of Canada securities on an overnight basis. These operations also improve the availability of the Bank’s holdings of Government of Canada securities. The volume of securities repo operations declined during the first quarter of 2024, resulting in a decrease of $2,099 million in securities lent or sold under repurchase agreements, compared with December 31, 2023.

Derivatives—indemnity agreements with the Government of Canada refers to the agreements that were put in place to indemnify the Bank and allow it to support Government of Canada, provincial and corporate bond markets. Losses resulting from the sale of assets within the Government of Canada Bond Purchase Program, the Provincial Bond Purchase Program and the Corporate Bond Purchase Program are indemnified by the Government of Canada, whereas gains on disposal are remitted to the government. The $25,592 million balance represents the fair value of the derivatives associated with the net unrealized losses on these assets as at March 31, 2024. Derivatives increased by $2,186 million during the three-month period, due to a slight increase mainly in long-term bond yields. This is represented in the asset profile chart by “All other assets.”

Bank notes in circulation represents approximately 37% (37% as at December 31, 2023) of the Bank’s total liabilities. Bank notes in circulation decreased by 4% compared with December 31, 2023, to $114,814 million as at March 31, 2024. This decrease reflects seasonal variation in demand for bank notes.

Deposits consists of deposits made by the Government of Canada, members of Payments Canada and others. This balance declined by 1% to $194,166 million as at March 31, 2024, compared with December 31, 2023, reflecting continued quantitative tightening.

Securities sold under repurchase agreements decreased by 36% to $4,265 million as at March 31, 2024, compared with December 31, 2023. This liability represents the repurchase price for securities repo operations and overnight reverse repo operations. The Securities Repo Operations program supports core funding markets and the proper functioning of the Government of Canada securities market. Overnight reverse repos are conducted as needed and help to effectively implement monetary policy by withdrawing intraday liquidity, complementing the standing deposit and lending facilities.

Deficiency increased to $6,660 million as at March 31, 2024, as a result of net losses of $934 million for the first three months of the year. As at March 31, 2024, the accumulated deficit was $7,672 million. Deficiency also includes the following offsetting amounts: $5 million of authorized share capital, a special reserve of $100 million, an investment revaluation reserve of $476 million and an actuarial gains reserve of $431 million, each as at March 31, 2024. Refer to Note 10 in the condensed interim financial statements for more information about the Bank’s deficiency.

Results of operations

Results of operations
(in millions of Canadian dollars)
For the three-month period ended March 31 2024   2023  
Interest revenue 873  969 
Interest expense (1,638) (2,319)
Net interest expense (765) (1,350)
Other income
Total loss before operating expenses (763) (1,348)
Total operating expenses (171) (162)
Net loss (934) (1,510)
Other comprehensive income (loss) 120  (25)
Comprehensive loss (814) (1,535)

The Bank incurred a net loss of $934 million for the three-month period ended March 31, 2024, primarily because the interest expense incurred on deposits was greater than the interest earned on investments. This net interest expense followed the Bank increasing its policy rate from 0.25% in the first quarter of 2022 to 5.00% in the third quarter of 2023. In time, the Bank will resume generating net income. The net losses do not affect the Bank’s ability to carry out its mandate.

Interest revenue depends on market conditions, the impact of those conditions on the interest-bearing assets held on the Bank’s balance sheet, and the volume and blend of these assets. The Bank earns interest on its investments in Government of Canada securities, on securities purchased under resale agreements (if any) and on assets acquired through large-scale asset purchase programs. In the first quarter of 2024, interest revenue decreased by $96 million (or 10%), compared with the same period in 2023. This decline was driven by the Bank’s lower average holding of interest-yielding investments throughout the period, which was partially offset by a slight increase in the average yield on investments.

Interest expense consists mainly of interest incurred on deposits held by the Bank. During the first quarter of 2024, the interest expense decreased by $681 million, compared with the same period in 2023, resulting from a lower average volume of deposits during the period. The decrease was partially offset by the Bank’s policy interest rate, which was higher than during the same period in 2023.

Operating expenses for the first quarter of 2024 increased by $9 million (or 6%) compared with the same period in 2023. This primarily reflects an increase in costs for staff, which was offset by a decrease in other operating expenses.

  • Staff costs increased by $15 million (or 17%), compared with the same period in 2023, as a result of the following changes:
    • Salary costs increased by $5 million (or 8%) because positions were filled to deliver the Bank’s core functions, including the new function of retail payments supervision. The annual compensation adjustment also contributed to the increase.
    • Benefits and other staff costs increased by $10 million (or 44%), mainly due to an increase in the expense associated with the Bank’s defined-benefit plans. This increase was a result of a decline in the discount rates used for their calculation,1 as well as an increase in the health premiums of employee benefits.
  • Other operating expenses decreased by $4 million (or 24%) compared with the same period in 2023. This decline was driven primarily by the completion of the Bank’s outsourced operational contract in 2023 for the Unclaimed Properties Office as the Bank shifted to internal solutions for 2024.

Other comprehensive income for the first quarter of 2024 was $120 million. It includes a remeasurement gain of $107 million on the Bank’s defined-benefit plans as a result of increases in discount rates2 and an increase in the fair value of the plans’ assets. It also includes a $13 million increase in the fair value of the Bank’s investment in the Bank for International Settlements.

Comprehensive loss for the first quarter of 2024 was $814 million, due primarily to the net loss of $934 million incurred during that period.

Looking ahead through 2024

The Bank’s 2024 Plan
(in millions of Canadian dollars)
2024 budget
For the year ended December 31 $   %  
Staff costs 379  54 
Bank note research, production and processing 13 
Premises costs 34 
Technology and telecommunications 122  17 
Depreciation and amortization 74  10 
Other operating expenses 85  12 
Total expenditures 707  100 

The year 2024 represents the last year of the Bank’s 2022–24 strategic plan, Delivering on Our Promise. The Bank’s financial management framework enables decisions about allocating resources to achieve the Bank’s objectives and mitigate risks in a prudent fiscal manner.3

Staff costs continues to represent the largest portion of the Bank’s expenditures, while production costs for bank notes are expected to decrease due to existing reserves. Other expenditures include the cost of enhancing systems and tools to support operations, sustain the Bank’s resilience posture and prepare for the future. These costs also contribute to fulfilling the Bank’s new core functions, advancing its digital transformation and mitigating risks.

Operational highlights and changes

Changes in personnel, operations and programs have occurred since December 31, 2023.

Governing Council and Board of Directors

No changes were made to the membership of the Governing Council or Board of Directors during the quarter.

Operations and programs

On January 24, 2024, on March 6, 2024, and on April 10, 2024, the Bank announced that it would maintain its policy rate.

Risk analysis

The Bank’s risk management framework and risk profile are discussed in the Annual Report 2023. This section also reviews the key areas of risk—financial, operational, strategic, and environmental and climate-related. The financial risks are discussed further in the notes to the financial statements of December 31, 2023, which are included in the Annual Report. Note 4 of the condensed interim financial statements for March 31, 2024, also provides an update on these financial risks. Although the pandemic has triggered more financial risks and volatility than usual involving some of the assets the Bank holds, the risks identified in the Annual Report remain the key ones for the Bank.

In May 2024, the Bank released its second annual Disclosure of Climate-Related Risks 2023, outlining the risks that climate change poses to its mandate and operations. This is a stand-alone report, prepared in accordance with recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosure.

Condensed interim financial statements

  1. 1. Benefit costs for a given period are based on the discount rate as at December 31 of the preceding year (e.g., the rate at December 31, 2023, was used to calculate the benefit expenses for 2024). Discount rates and related benefit costs share an inverse relationship: as rates decrease, benefit expenses increase (and vice versa). The discount rates used to calculate the pension benefit plans and other benefit plan expenses ranged from 5.0% to 5.1% for 2023 and are at 4.6% for the first quarter of 2024. This decrease will result in increased benefit costs for 2024, all else being equal.[]
  2. 2. The net defined-benefit liabilities are measured using the discount rate in effect as at the period-end. The rate applicable to the net defined-benefit liabilities as at March 31, 2024, was a range of 4.7% to 5.0% (4.6% as at December 31, 2023). See Note 9 to the condensed interim financial statements for more information.[]
  3. 3. The Bank’s forecasts for its operations do not include projections of net income and financial position. Such projections would require assumptions about interest rates, which could be interpreted as a signal of future monetary policy.[]

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