For the period ended March 31, 2025, unaudited
Context of the Quarterly Financial Report
The Bank of Canada (the Bank) 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 14, 2025.
This Quarterly Financial Report should be read in conjunction with the condensed interim financial statements for the first quarter of 2025 included in this publication and with the Bank’s Annual Report 2024. 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
During the COVID‑19 pandemic, the Bank used extraordinary measures to stabilize financial markets and support the economic recovery. In response to rising inflation, it raised its policy rate and began quantitative tightening (QT) by letting bonds mature without replacing them. As inflation eased, the Bank began lowering the overnight rate in June 2024 while continuing to normalize its balance sheet. On January 29, 2025, the Bank announced its plan to complete its balance sheet normalization, ending QT. In early March, the Bank resumed asset purchases through its regular term repo operations as part of balance sheet management. This will be followed by Government of Canada treasury bill purchases on the primary market to restore a more balanced mix of assets on the Bank’s balance sheet. Refer to the Bank’s website for more information on these measures, including the relevant press releases and market notices.
Managing the balance sheet
| Condensed financial position (in millions of Canadian dollars) |
|||
|---|---|---|---|
| As at | March 31, 2025 | December 31, 2024 | March 31, 2024 |
| Assets | |||
| Loans and receivables | 4,021 | 19,462 | 9 |
| Investments | 227,671 | 236,868 | 280,205 |
| Derivatives—indemnity agreements with the Government of Canada | 17,277 | 19,786 | 25,592 |
| All other assets* | 1,072 | 1,127 | 1,109 |
| Total assets | 250,041 | 277,243 | 306,915 |
| Liabilities and deficiency | |||
| Bank notes in circulation | 117,312 | 121,298 | 114,814 |
| Deposits | 141,435 | 164,359 | 194,166 |
| Securities sold under repurchase agreements | - | - | 4,265 |
| Other liabilities | 264 | 298 | 330 |
| Deficiency | (8,970) | (8,712) | (6,660) |
| Total liabilities and deficiency | 250,041 | 277,243 | 306,915 |
* 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 Bank’s total assets decreased by 10% to $250,041 million as at March 31, 2025, compared with their value as at December 31, 2024. The main driver of this decrease was a reduction in Loans and receivables and the maturity of investments.
Loans and receivables decreased by $15,441 million compared with December 31, 2024. This reduction was mostly due to the maturity of the overnight repo transactions that were outstanding as of December 31, 2024. Term repo transactions took place in March 2025 following the Bank’s decision to restart the program. Term repo operations are conducted to manage the Bank’s balance sheet and support the effective implementation of monetary policy. They generally take place on a biweekly basis.
Investments decreased by 4% compared with December 31, 2024, to $227,671 million as at March 31, 2025. 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 $7,677 million during the first three months of the year. In particular, Government of Canada bonds held at fair value decreased by $5,449 million, and Government of Canada bonds held at amortized cost decreased by $2,228 million. These declines are largely due to the bonds maturing.
- The Bank engages in security lending operations, which provide market participants with a temporary source of Government of Canada securities and provincial bonds on an overnight basis. The volume of securities lending operations declined during the first quarter of 2025, resulting in a decrease of $1,462 million of securities being lent as at March 31, 2025, compared with December 31, 2024.
Derivatives—indemnity agreements with the Government of Canada refers to the indemnity 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 $17,277 million balance represents the fair value of the derivatives associated with the net unrealized losses on these assets as at March 31, 2025. Derivatives decreased by $2,509 million during the three-month period, mainly due to a decline in bond yields and holdings. This is represented in the asset profile chart by “All other assets.”
Bank notes in circulation represents approximately 45% (42% as at December 31, 2024) of the Bank’s total liabilities of $259,011 million. Bank notes in circulation decreased by 3% during the three-month period to $117,312 million as at March 31, 2025. This decrease mainly reflects market demand during the first quarter of the year.
Deposits consists of deposits made by the Government of Canada, members of Payments Canada and others. This balance declined by 14% to $141,435 million as at March 31, 2025, compared with December 31, 2024, reflecting continued normalization of the balance sheet.
Deficiency increased to $8,970 million as at March 31, 2025, as a result of a $258 million comprehensive loss during the first three months of the year. As at March 31, 2025, the accumulated deficit was $10,075 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 $578 million and an actuarial gains reserve of $422 million. Refer to Note 10 in the condensed interim financial statements for more information.
Results of operations
| Condensed results of operations (in millions of Canadian dollars) |
||||
|---|---|---|---|---|
| For the three-month period ended March 31 | 2025 | 2024 | ||
| Interest revenue | 816 | 873 | ||
| Interest expense | (897) | (1,638) | ||
| Net interest expense | (81) | (765) | ||
| Other revenue | 4 | 2 | ||
| Total loss before operating expenses | (77) | (763) | ||
| Total operating expenses | (181) | (171) | ||
| Net loss | (258) | (934) | ||
| Other comprehensive income (loss) | - | 120 | ||
| Comprehensive loss | (258) | (814) | ||
The Bank incurred a net loss of $258 million for the three-month period ended March 31, 2025, primarily because the interest expense incurred on deposits was greater than the interest earned on investments. This net interest expense resulted from the Bank raising its policy rate to a peak of 5.00% in late 2023 before gradually lowering it to 2.75% in the first quarter of 2025. 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 and on assets acquired through large-scale asset purchase programs. In the first quarter of 2025, interest revenue decreased by $57 million (or 7%) compared with the same period in 2024. This decline was the result of the Bank’s lower average holding of interest-yielding investments throughout the period combined with a slight increase in the average yield on the investments portfolio. The decline was offset by an increase in interest earned on securities purchased under resale agreements due to a higher volume of overnight repo operations and the restart in March 2025 of the term repo program.
Interest expense consists mainly of interest incurred on deposits held by the Bank. During the first quarter of 2025, the interest expense decreased by $741 million (or 45%) compared with the same period in 2024, resulting from lower average deposits and a decrease in interest rates between the two comparative periods.
Operating expenses for the first quarter of 2025 increased by $10 million (or 6%) compared with the same period in 2024. This primarily reflects an increase in costs for technology and telecommunications as well as in those for depreciation and amortization. The increase was partially offset by a slight decrease in costs for other operating expenses.
- Technology and telecommunications costs increased by $5 million (or 17%) compared with the same period in 2024. This increase was mainly driven by timing of software renewals.
- Depreciation and amortization costs increased by $3 million (or 18%) compared with the same period in 2024. This increase is due to changes in useful life assumptions for existing assets and new assets put in use.
Other comprehensive income for the first quarter of 2025 was $nil ($120 million for the same period in 2024). It is the result of a remeasurement loss of $31 million on the Bank’s defined-benefit plans, mainly due to a decrease in the discount rates,1 offset by a $31 million increase in the fair value of the Bank’s investment in the Bank for International Settlements.
Looking ahead through 2025
| The Bank’s 2025 Plan (in millions of Canadian dollars) |
||||
|---|---|---|---|---|
| 2025 budget | ||||
| For the year ended December 31 | $ | % | ||
| Staff costs | 431 | 55 | ||
| Bank note research, production and processing | 39 | 5 | ||
| Premises costs | 36 | 5 | ||
| Technology and telecommunications | 131 | 16 | ||
| Depreciation and amortization | 72 | 9 | ||
| Other operating expenses | 78 | 10 | ||
| Total operating expenses | 787 | 100 | ||
This is the first year of the Bank’s 2025–27 strategic plan, Canadians Count on Us. 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.2
Staff costs continues to represent the largest portion of the Bank’s expenditures, while production costs for bank notes represent the amount for the production of new notes required in 2025. Other expenditures include the cost to fulfill the Bank’s core functions, enhance systems and tools to support operations, manage risk, sustain the Bank’s resilience posture and prepare for the future.
Operational highlights and changes
Changes in personnel, operations and programs have occurred since December 31, 2024.
Governing Council and Board of Directors
Carlos Leitão resigned from the Board of Directors effective March 19, 2025. The Board appointed Michelle Alexopoulos as an external Deputy Governor for a term of two years, effective March 17, 2025.
Operations and programs
The Bank announced a decrease of 25 basis points in the policy interest rate on January 29, 2025, and again on March 12, 2025. On April 16, 2025, the Bank announced that it is maintaining its policy rate at 2.75%.
The Bank of Canada announced, on January 29, 2025, that it would make an adjustment to the deposit rate. This change to the monetary policy implementation framework is being made to improve its effectiveness.
Risk analysis
The Bank’s risk management framework and risk profile are discussed in the notes to the financial statements of December 2024. Note 4 of the condensed interim financial statements for March 31, 2025, also provides an update on these financial risks.
Condensed interim financial statements
- 1. The net defined-benefit obligations are measured using the discount rate in effect as at the period-end. The rate applicable to the defined-benefit obligations for the pension benefit plans as at March 31, 2025, was 4.7% (4.8% as at December 31, 2024). See Note 9 in in the condensed interim financial statements for more information.[←]
- 2. 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.[←]