2020 Financial results


This section provides a narrative discussion outlining the key highlights of the Bank’s financial results for the year ended December 31, 2020. This discussion should be read with the financial statements and accompanying notes for the year ended December 31, 2020. Management is responsible for the information presented in the Annual Report.

COVID‑19: What the Bank is doing

The Bank acted in several ways throughout the year to conduct monetary policy and to support key financial markets and individual financial institutions to ensure that they continue to function properly and that enough liquidity exists in the financial system.1 In March, key financial markets became strained; in response, the Bank introduced several new facilities and operations (see below). Market functioning was restored, and some of the operations were wound down over the course of the year. The Bank deployed the following measures in 2020:

Refer to Note 3 in the financial statements for more information on these measures.

Managing the balance sheet

Financial position
(in millions of Canadian dollars)
As at December 31 2020 2019
Loans and receivables 155,323.9 15,521.9
Investments 391,764.8 103,346.9
All other assets* 744.7 774.0
Total assets 547,833.4 119,642.8
Liabilities and equity
Bank notes in circulation 106,925.0 93,094.3
Deposits 436,100.5 25,243.3
Securities sold under repurchase agreements 3,000.8 -
Derivatives—Indemnity agreements with the Government of Canada 29.3 -
Other liabilities 1,199.7 774.9
Equity 578.1 530.3
Total liabilities and equity 547,833.4 119,642.8

* Includes Cash and foreign deposits, Capital assets and Other assets

The Bank’s holdings of financial assets are typically driven by its role as the exclusive issuer of Canadian bank notes. However, changes to the Bank’s balance sheet in 2020 largely result from activities undertaken as part of the Bank’s monetary policy and financial system functions. The measures introduced during the year resulted in a significant increase in the balance sheet: the Bank’s total assets more than quadrupled over 2020 to $547,833.4 million as at December 31, 2020. To respond to the pandemic, the Bank expanded the range of instruments it acquires as well as their aggregate amount. On the liability side, these interventions resulted in a significant increase in deposits.

Loans and receivables, composed primarily of securities purchased under resale agreements (SPRAs), totalled $155,323.9 million as at December 31, 2020 ($15,521.9 million as at December 31, 2019). SPRAs are high-quality assets acquired through the repo market, in line with the Bank’s framework for market operations and liquidity provision. The Bank carries out these market operations to manage its balance sheet, promote the orderly functioning of Canadian financial markets, offset seasonal fluctuations in the demand for bank notes and conduct monetary policy. Beginning in March 2020, to increase liquidity in the Canadian financial system, the Bank increased SPRAs by extending terms, by expanding the size and the frequency of the transactions and by expanding eligible collateral.

Investments more than tripled to $391,764.8 million as at December 31, 2020. This increase 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, increased by $257,700.4 million during the year. This growth reflects the increase in the Government of Canada issuances of these instruments, combined with the launch of the GBPP.
  • The launch of the other asset purchase programs resulted in an increase of $30,669.7 million during the year.

Bank notes in circulation increased by 15 percent as at December 31, 2020, driven primarily by higher demand for bank notes since the start of the pandemic and by some seasonal variations in demand.

Deposits consists of Government of Canada deposits, deposits by members of Payments Canada and other deposits. While deposits are normally maintained at a lower level, they now represent the largest liability on the Bank’s balance sheet. This change in deposits results directly from the purchase programs that the Bank implemented during the year to support the Canadian economy and financial system.2

Derivatives—Indemnity agreements with the Government of Canada refers to the indemnification agreements that were put in place to allow the Bank to support the Government of Canada bond market, as well as the provincial and corporate bond markets. Losses resulting from the sale of assets within the GBPP, CBPP and PBPP are indemnified by the Government of Canada, whereas gains on disposal are remitted to the government. The $29.3 million balance represents the fair value of the derivatives associated with the net unrealized gains on these assets as at December 31, 2020.

Equity includes $5.0 million of authorized share capital and a $25.0 million statutory reserve. The Bank also holds a special reserve of $100.0 million to offset potential unrealized valuation losses due to changes in the fair value of the Bank’s investments that are not covered by an indemnity agreement. The largest reserve held by the Bank is the investment revaluation reserve, which represents the unrealized fair value gains in the Bank’s investment in the Bank for International Settlements (BIS).

Refer to Note 16 in the financial statements for more information about the Bank’s equity.

Results of operations

Results of operations
(in millions of Canadian dollars)
For the year ended December 31  2020   2019  
Interest revenue 3,377.9  2,275.6 
Interest expense (794.4) (406.6)
Net interest income 2,583.5  1,869.0 
Other income 6.2  12.2 
Total income 2,589.7  1,881.2 
Expenses (625.5) (579.5)
Net income 1,964.2  1,301.7 
Other comprehensive loss (143.5) (128.4)
Comprehensive income 1,820.7  1,173.3 

Comprehensive income increased by 55 percent to $1,820.7 million in 2020 compared with 2019. The main driver for this growth is the increased revenue from a larger amount of financial assets held by the Bank during the year resulting from the measures the Bank put in place to support the economy.

Interest revenue is driven by current market conditions, their impact on the interest-bearing assets held on the Bank’s balance sheet, and the volume and blend of these assets. The Bank’s primary sources of interest revenue are interest earned on its investments in Government of Canada securities and interest earned on SPRAs. In 2020, interest revenue increased by $1,102.3 million (or 48 percent). This increase is due to the greater volume of assets held by the Bank.

Interest expense consists mainly of interest incurred on deposits held by the Bank. In 2020, interest expense increased by $387.8 million. The increase is primarily the result of a larger amount of deposits held at the Bank. It was offset by the reduction in the Bank’s policy interest rate.

Expenses for the year increased by 8 percent compared with 2019. This primarily reflects increases in staff costs and in expenditures on resilience initiatives as per the Bank’s medium-term plan, including enhancements to cyber security and business recovery.

  • Staff costs increased by 13 percent over the previous year. Benefit costs associated with the Bank’s defined-benefit plans increased by $20.7 million (or 21 percent), mainly because of a decrease in the discount rates used for their calculation.3 Salary costs also increased by $16.9 million (or 9 percent) as a result of new strategic-initiatives positions being filled and the annual compensation adjustment.
  • Technology and telecommunications expenses were $16.7 million (or 23 percent) higher in 2020 compared with 2019. This increase was driven by the Bank’s continued focus on strengthening its business continuity posture by investing in cyber security and business resilience initiatives.

Other comprehensive loss for 2020 was $143.5 million. It consists of remeasurement losses of $191.3 million on the Bank’s defined-benefit plans due to decreases in discount rates,4 offset by a $47.8 million increase in the fair value of the Bank’s investment in the BIS.

Looking ahead to 2021

The Bank’s 2021 Plan
(in millions of Canadian dollars)
2020 budget 2020 actuals 2021 budget
For the year ended December 31 $ % % $ %
Core expenditures 379 55 378  60 401 54
Bank note production 47 7 46  7 84 11
New mandates 15 2 1 22 3
Sustaining resilience operations 57 8 55  9 51 7
Deferred employee benefits (net of allocations) 32 5 38  6 53 7
Strategic investment programs 153 22 106  17 138 18
Other provisions 3 1 (1) - 1 -
Total expenditures* 686 100 626  100 750 100

* Total expenditures includes capital expenditures and lease liabilities repayments and excludes depreciation.

In 2020, the Bank underspent compared with the budget. This was due mainly to delays in projects as the Bank redirected resources to support the economy and financial system in response to the COVID‑19 pandemic. The year 2021 represents the last year of the Bank’s 2019–21 medium-term plan, Leading in the New Era. The Bank’s financial management framework is designed to enable decision making related to the allocation of resources to achieve the Bank’s objectives and mitigate risks in a prudent fiscal manner. The framework balances the need to be fiscally responsible in the public sector environment and the need to invest in our people and tools.5

Accounting and control matters

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

Internal control over financial reporting

The Bank maintains an internal control framework to evaluate the design and effectiveness of internal controls over financial reporting, including disclosure controls and procedures to provide reasonable assurance regarding 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 the Control Objectives for Information and Related Technology framework.

  1. 1. Refer to COVID‑19: Actions to Support the Economy and Financial System for more details on the Bank’s measures.[]
  2. 2. Refer to Understanding Quantitative Easing for more details.[]
  3. 3. 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, 2019, was used to calculate the benefit expenses for 2020). 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 decreased by an average of 80 basis points between 2019 and 2020 (from a range of 3.5 to 4.0 percent to a range of 2.9 to 3.2 percent). This decrease will result in increased benefit costs for 2021, all else being equal.[]
  4. 4. 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 December 31, 2020, ranged from 1.9 to 2.7 percent (2.9 to 3.2 percent as at December 31, 2019). See Note 14 to the financial statements for more information.[]
  5. 5. 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.[]