For the period ended June 30, 2025, unaudited
Context of 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 August 20, 2025.
This Quarterly Financial Report should be read in conjunction with the condensed interim financial statements for the second 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. In the first quarter of 2025, the Bank announced its plan to complete its balance sheet normalization, ending QT, and it resumed making 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 proportionate 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 | June 30, 2025 | December 31, 2024 | June 30, 2024 |
| Assets | |||
| Loans and receivables | 8,161 | 19,462 | 13 |
| Investments | 217,237 | 236,868 | 247,309 |
| Derivatives—indemnity agreements with the Government of Canada | 19,270 | 19,786 | 24,604 |
| All other assets* | 1,118 | 1,127 | 1,095 |
| Total assets | 245,786 | 277,243 | 273,021 |
| Liabilities and deficiency | |||
| Bank notes in circulation | 121,448 | 121,298 | 117,925 |
| Deposits | 133,007 | 164,359 | 158,496 |
| Securities sold under repurchase agreements | - | - | 3,850 |
| Other liabilities | 267 | 298 | 307 |
| Deficiency | (8,936) | (8,712) | (7,557) |
| Total liabilities and deficiency | 245,786 | 277,243 | 273,021 |
* All other assets includes Cash and foreign deposits, Capital assets and Other assets.
The Bank’s holdings of financial assets arise from its unique role as the exclusive issuer of Canadian bank notes and its operations in support of monetary policy and the broader financial system. The Bank’s total assets decreased by 11% to $245,786 million as at June 30, 2025, compared with their value as at December 31, 2024. The main drivers of this decrease were the maturity of investments and a reduction in Loans and receivables.
Loans and receivables decreased by $11,301 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. This was partially offset by the addition of term repo transactions following the Bank’s decision to restart the program in March 2025. 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 declined by 8% compared with December 31, 2024, to $217,237 million as at June 30, 2025. This decrease was driven mainly by a reduction in investments in Government of Canada securities, which include nominal bonds and real return bonds. In particular, Government of Canada bonds held at fair value decreased by $11,694 million, and those held at amortized cost decreased by $5,467 million. These declines are largely due to the bonds maturing.
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 $19,270 million balance represents the fair value of the derivatives associated with the net unrealized losses on these assets as at June 30, 2025. Derivatives decreased by $516 million during the six-month period, mainly due to a decline in bond yields and total holdings. This is represented in the asset profile chart by “All other assets.”
Bank notes in circulation represents approximately 48% of the Bank’s total liabilities (42% as at December 31, 2024). Bank notes in circulation increased slightly compared with December 31, 2024, to $121,448 million as at June 30, 2025, reflecting seasonal variations in demand.
Deposits represents 52% of the Bank’s total liabilities as at June 30, 2025, (58% as at December 31, 2024) and consists of deposits made by the Government of Canada, members of Payments Canada and others. This balance declined by 19% to $133,007 million as at June 30, 2025, compared with December 31, 2024, reflecting continued normalization of the balance sheet.
Deficiency increased to $8,936 million as at June 30, 2025, as a result of a $224 million comprehensive loss during the first six months of the year. As at June 30, 2025, the accumulated deficit was $10,109 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 $586 million and an actuarial gains reserve of $482 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) |
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|---|---|---|---|---|
| For the three-month period ended June 30 |
For the six-month period ended June 30 |
|||
| 2025 | 2024 | 2025 | 2024 | |
| Interest revenue | 816 | 863 | 1,632 | 1,736 |
| Interest expense | (684) | (1,611) | (1,581) | (3,249) |
| Net interest income (expense) | 132 | (748) | 51 | (1,513) |
| Other revenue | 11 | 10 | 15 | 12 |
| Total income (loss) before operating expenses | 143 | (738) | 66 | (1,501) |
| Total operating expenses | (177) | (172) | (358) | (343) |
| Net loss | (34) | (910) | (292) | (1,844) |
| Other comprehensive income | 68 | 13 | 68 | 133 |
| Comprehensive income (loss) | 34 | (897) | (224) | (1,711) |
The second quarter of 2025 is the first quarter since 2022 that the Bank has reported comprehensive income. The Bank incurred net losses of $34 million and $292 million, respectively, for the three- and six-month periods ended June 30, 2025. These losses do not affect the Bank’s ability to carry out its mandate, and the Bank expects to resume generating net income later in the year. The losses in 2025 were primarily driven by net interest income being lower than operating expenses.
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 second quarter and the first six months of 2025, interest revenue decreased by $47 million (or 5%) and $104 million (or 6%), respectively, compared with the same periods in 2024. These declines were the result of the Bank’s lower average holding of interest-yielding investments throughout the periods, which was offset by a slight increase in the average yield on the investments portfolio. The declines were mitigated by an increase in interest earned on securities purchased under resale agreements. This increase was due to a higher volume of overnight repo operations compared with the six-month period in 2024 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 second quarter and the first six months of 2025, the interest expense decreased by $927 million (or 58%) and $1,668 million (or 51%), respectively, compared with the same periods in 2024. This decline was driven by lower average deposits and a reduction in interest rates.
Operating expenses for the second quarter and first six months of 2025 increased by $5 million (or 3%) and $15 million (or 4%), respectively, compared with the same periods in 2024. This primarily reflects increases in bank note research, production and processing costs and premises costs. These increases were offset by lower costs for other operating expenses.
- Bank note research, production and processing costs increased by $11 million and $12 million in the second quarter and the first six months of 2025, respectively, compared with the same periods in 2024. This increase is due to the absence of a production run in 2024. The timing of bank note production varies from one year to the next based on the annual production plan.
- Premises costs increased by $4 million and $6 million in the second quarter and the first six months of 2025, respectively, compared with the same periods in 2024, due to repairs and renovations at regional offices.
- Other operating expenses decreased by $4 million and $5 million in the second quarter and first six months of 2025, respectively, compared with the same periods in 2024, primarily due to reduced consulting fees.
For the six months ended June 30, 2025, other comprehensive income decreased by $65 million compared with the same period in 2024. This decline was primarily driven by lower remeasurement gains on the on the Bank’s defined-benefit plans, reflecting a smaller increase in the discount rates in 2025 compared with 2024.1 The decrease was partially offset by a higher gain 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) |
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|---|---|---|---|---|
| 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 supports informed decisions about allocating resources. The framework is aimed at achieving the Bank’s objectives while prudently managing fiscal risks.2
Staff costs remains the largest portion of the Bank’s expenditures, while production costs for bank notes represent the anticipated volume of new notes required in 2025. Other expenditures include the cost to fulfill the Bank’s core functions, modernize 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 March 31, 2025.
Governing Council and Board of Directors
Peter P. Dhillon resigned from the Board of Directors effective August 5, 2025.
Operations and programs
On April 16, 2025, June 4, 2025, and July 30, 2025, the Bank announced that it was maintaining its policy rate at 2.75%.
Risk analysis
The Bank’s financial risks are discussed in the notes to the financial statement of December 31, 2024. Note 4 of the condensed interim financial statements for June 30, 2025, also provides an update on these financial risks.
In June 2025, the Bank released its annual Disclosure of Climate-Related Risks 2024, outlining the climate-related risks that may affect its mandate and operations. This stand-alone report is prepared in accordance with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures.
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 as at June 30, 2025, was a range of 4.3% to 5.0% (4.2% to 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.[←]