Annual Report 2025

Message from the Governor

In 2025, the Bank of Canada celebrated its 90th anniversary. Born in a time of deep economic upheaval, the Bank was created to restore stability and confidence. Our role in promoting stability in periods of disruption remains at the heart of our work today.

The Canadian economy entered 2025 on solid footing, with inflation near the 2% target and economic activity growing. However, US tariffs and the uncertainty created by the frequent shifts and reversals in US trade policy tested the resilience of the Canadian economy.

The Bank remained focused on maintaining price stability. We cut our policy interest rate four times, totalling 100 basis points, to support the economy and keep inflation close to target.

Inflation remained around 2% throughout the year and Canada avoided a recession. But the trade war has damaged our economy. As the global and Canadian landscapes shift, how our economy adapts to the structural changes underway will determine our future prosperity.

Canada held the G7 presidency in 2025, which offered an opportunity to lead discussions on the risks of further economic fragmentation, and to reinforce the importance of international cooperation. The Bank contributed to discussions on global issues, including cross-border payments, artificial intelligence and financial stability, cyber security, and risks linked to the growing footprint of non-bank financial institutions in core funding markets.

Preparing for the future

Work began on the 2026 renewal of the monetary policy framework with the federal government. Key research questions include:

• the monetary policy responses to major supply shocks
• the measurement of core inflation
• the link between monetary policy, housing affordability and inflation

The 2% inflation target is not being reviewed—it has proven effective in anchoring expectations and maintaining price stability.

Our regulatory work in the payments ecosystem also expanded in 2025. In September, our mandate to supervise retail payment service providers (PSPs) came into effect. About 1,600 PSPs in Canada have registered to be supervised by the Bank. Our role in this regard is to ensure that they manage operational risks and safeguard funds held on behalf of households and businesses.

In November, the federal budget announced two new responsibilities for the Bank: overseeing consumer-driven banking and regulating stablecoins. Both these new areas have the potential to bring benefits to Canadians, but risks exist and must be managed. Our aim is to support innovation while protecting safety and stability.

To stay ahead of evolving risks to financial stability, we built on the system-wide surveillance framework introduced in 2024. We strengthened our analysis of financial stresses across households, banks, businesses and non-bank financial institutions, and we introduced an expanded dashboard of financial stability indicators.

Finally, we advanced work on the new vertical $20 bank note, which will be issued in early 2027 with enhanced security features. A new $5 note will follow soon after, and work has also begun on the security features for the new $50 and $100 notes.

Financial results

Overview

This section provides the key highlights of the financial results for the Bank of Canada (the Bank) for the year ended December 31, 2025. These highlights should be read with the financial statements and accompanying notes for the year ended December 31, 2025. Management is responsible for the information presented in the Annual Report.

In 2025, the bank resumed normal balance sheet management following a pandemic-related expansion to support market functioning and economic stability, and the subsequent contraction through quantitative tightening once those measures were no longer required. The bank resumed asset purchases through its regular term repo operations in March and treasury bill purchases in December. Refer to the Bank’s website for more information on these measures, including the relevant press releases and market notices.

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 value of the assets on the Bank’s balance sheet has declined due to continued normalization of the balance sheet. The total assets decreased by 13% during the year to $240,522 million as at December 31, 2025, compared with their value as at December 31, 2024. This decrease was driven by the maturing of investments as the Bank reduced its asset holdings, partially offset by an increase in Loans and receivables.

Loans and receivables increased by $8,341 million compared with December 31, 2024, due to the restart of term repo operations in 2025. These operations are conducted to manage the Bank’s balance sheet and support the effective implementation of monetary policy.

Investments decreased by 19% to $192,215 million as at December 31, 2025, compared with December 31, 2024. This decrease reflects the Bank’s continued normalizing of its balance sheet and was driven mainly by the following movements within the Bank’s holdings:

• Government of Canada securities, which include treasury bills, nominal bonds and real return bonds, decreased by $40,879 million in 2025. This decrease reflects the maturing of Government of Canada bonds held at fair value ($31,298 million) and at amortized cost ($11,660 million) partially offset by the recommencement of treasury bill purchases ($2,079 million).
• The Bank’s Securities Lending Program, aimed at supporting liquidity in Government of Canada securities markets, saw the volume of securities lent decline by $1,232 million as at December 31, 2025, compared with December 31, 2024.

Derivatives—indemnity agreements with the Government of Canada refers to the agreements put in place to indemnify the Bank and allow it to support Government of Canada and provincial bond markets. Losses resulting from the sale of assets within the Government of Canada Bond Purchase Program and the Provincial Bond Purchase Program are indemnified by the Government of Canada, whereas gains on disposal are remitted to the government. The $19,291 million balance represents the fair value of the derivatives associated with the net unrealized losses on these assets as at December 31, 2025. Derivatives decreased by $495 million during the year, 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 50% (42% as at December 31, 2024) of the Bank’s total liabilities. Bank notes in circulation increased by 2% during the year to $124,319 million as at December 31, 2025. This increase reflects market demand during the year.

Deposits represents approximately 50% of the Bank’s total liabilities (57% 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 24% to $124,438 million as at December 31, 2025, compared with December 31, 2024, as a result of continued balance sheet normalization.

Deficiency decreased to $8,522 million as at December 31, 2025, due to comprehensive income of $190 million for the year. As at December 31, 2025, the accumulated deficit was $9,899 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 $656 million and an actuarial gains reserve of $616 million, each as at December 31, 2025. Refer to Note 14 in the financial statements for more information.

The Bank incurred a net loss of $82 million for the year, primarily due to net interest income being lower than operating expenditures. As balance sheet normalization continued during the year, deposit balances declined. This, along with lower interest rates, resulted in lower interest expense compared with 2024 and contributed to a return to quarterly net income in the last two quarters of the year. 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 2025, interest revenue declined by $329 million (or 9%) compared with 2024, primarily due to a lower average holding of interest-yielding investments as the Bank normalizes its balance sheet. This was partially offset by a slight increase in the average yield on the investment portfolio and the restart of the term repo program in March 2025.

Interest expense consists mainly of interest incurred on deposits at the Bank held by Members of Payments Canada and others. During the year, the interest expense decreased by $3,360 million (or 56%) compared with 2024, as a result of fewer average deposits and a decrease in interest rates throughout the year.

Operating expenditures increased by $35 million (5%) compared with 2024, primarily due to higher bank note research, production and processing costs as volumes increased in line with the annual plan and market demand. These pressures were partially offset by lower deferred employee benefits resulting from discount rate changes and by modest variations across other cost categories.

Other comprehensive income for the year was $272 million. It includes a remeasurement gain of $163 million on the Bank’s defined-benefit plans, which is due mainly to an increase in the fair value of the plans’ assets and increases in discount rates.1 It also includes a $109 million increase in the fair value of the Bank’s investment in the Bank for International Settlements.

The year 2026 represents the second year of the Bank’s 2025–27 strategic plan, Canadians Count on Us. The Bank’s financial management framework enables decisions to allocate resources, achieve the Bank’s objectives and mitigate risks in a prudent fiscal manner.2

The Bank has committed to reducing its core operating expenses by 15% by the end of 2028, in line with the federal government’s Comprehensive Expenditure Review. The 2026 budget marks the first year in which these reductions begin to take effect, with certain cost-saving measures and efficiencies already reflected in the planned expenditures for the year.

Staff costs continue to represent the largest portion of the Bank’s expenditures, while production costs for bank notes are expected to increase due to a higher volume of new notes required in 2026. Other expenditures include requirements to carry out 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

Board of Directors

Peter P. Dhillon resigned from the Board of Directors effective August 5, 2025. Robert Campbell and Claire Kennedy resigned from the Board effective November 26, 2025. On November 27, 2025, Chantal Frappier, Marjolaine Giasson, Sandra L. Hanington, Maureen C. Jensen and Andrew D. Mutch were appointed to the Board of Directors.

Accounting and control matters

For details of the Bank’s financial reporting framework and accounting matters, refer to the annual financial statements.

Internal control over financial reporting

The Bank maintains a framework to evaluate the design and effectiveness of internal controls over financial reporting. This framework includes disclosure controls and procedures to provide reasonable assurance about the reliability of financial reporting and the preparation of the financial statements in accordance with International Financial Reporting Standards. Every year, the Bank certifies its internal controls over financial reporting. This process is based on the Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and on the Control Objectives for Information and Related Technologies framework.

Endnotes