Financial results


This section provides the key highlights of the Bank’s financial results for the year ended December 31, 2021. These highlights should be read with the financial statements and accompanying notes for the year ended December 31, 2021. Management is responsible for the information presented in the Annual Report.

COVID‑19: What the Bank has been doing

Since the start of the COVID‑19 pandemic, the Bank has acted in several ways to support the Canadian economy and financial system. When key financial markets became strained in March 2020, the Bank responded by introducing a number of programs to provide liquidity and maintain market functioning.

Throughout the year, the Bank continued to adjust the programs that were launched in 2020. These facilities and operations were either suspended, discontinued or scaled back. Refer to the Bank’s website for the relevant market notices and more information on these measures.

Managing the balance sheet

Financial position
(in millions of Canadian dollars)
As at December 31 2021 2020
Loans and receivables 23,424 155,324
Investments 468,656 391,765
Derivatives—indemnity agreements with the Government of Canada 6,394 -
All other assets* 891 744
Total assets 499,365 547,833
Liabilities and equity
Bank notes in circulation 115,155 106,925
Deposits 347,034 436,100
Securities sold under repurchase agreements 35,560 3,001
Derivatives—Indemnity agreements with the Government of Canada - 29
Other liabilities 1,008 1,200
Equity 608 578
Total liabilities and equity 499,365 547,833

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

The Bank’s holdings of financial assets are typically related to its role as the exclusive issuer of Canadian bank notes. However, the higher levels of assets in recent quarters result largely from activities undertaken as part of the Bank’s monetary policy and financial system functions. The Bank’s assets peaked in the first quarter of 2021 but began to decrease as market conditions improved. The Bank then discontinued several emergency support programs that were introduced in 2020 in response to the COVID‑19 shock. The Bank’s total assets decreased by 9% during the year to $499,365 million as at December 31, 2021. The main driver of the decline was the maturity of loans and receivables. This was partially offset by continued purchases under the Bank’s Government of Canada Bond Purchase Program (GBPP) throughout 2021.

Loans and receivables is composed primarily of securities purchased under resale agreements (SPRAs). SPRAs are high-quality assets acquired through the repo market, in line with the Bank’s framework for market operations and liquidity provision. Normally, the Bank carries out these market operations to manage its balance sheet and offset seasonal fluctuations in the demand for bank notes. The Bank began to substantially increase the scale of such operations in March 2020, with the principal aim of promoting the orderly functioning of Canadian financial markets. Starting in the middle of the first quarter of 2021, the demand for the program steadily declined, leading to its suspension in the second quarter of 2021. Compared with December 31, 2020, loans and receivables decreased by 85% to $23,424 million as at December 31, 2021, as a result of the natural maturing of SPRA operations.

Investments increased by 20% to $468,656 million as at December 31, 2021. This increase was driven mainly by the following movements within the Bank’s holdings:

  • Government of Canada securities, which include nominal bonds and real return bonds, increased by $96,829 million during 2021. This growth reflects the Bank’s continued purchases under the GBPP for the majority of the year. As the Canadian economy began to improve, the Bank adjusted its quantitative easing program, by reducing its new purchases in the second quarter of 2021 and ending them entirely in the fourth quarter. The GBPP then entered into a reinvestment phase, during which the Bank will continue to purchase Government of Canada bonds to replace maturities, keeping its overall holdings stable.
  • The change in the balance of Government of Canada bonds was partially offset by a decrease of $50,419 million in treasury bills, largely as a result of maturities. This change represents a decrease of 97% compared with December 31, 2020.
  • The Bank engages in securities repurchase (repo) operations. These provide a temporary source of Government of Canada securities on an overnight basis to market participants. They also improve the availability of the Bank’s holdings of Government of Canada securities. The volume of securities repo operations continued to grow during 2021, resulting in an increase of $32,616 million compared with December 31, 2020.

Derivatives—indemnity agreements with the Government of Canada refers to the indemnity agreements that were put in place to allow the Bank to support provincial and corporate bond markets as well as the Government of Canada bond market. Losses resulting from the sale of assets within the GBPP, the Corporate 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 $6,394 million balance represents the fair value of the derivatives associated with the net unrealized losses on these assets as at December 31, 2021. Long-term bond yields rose in 2021, compared with the same period in 2020, as the outlook for the economy improved. This resulted in a net decrease in the fair value of the assets held by the Bank, which in turn led to an increase in net unrealized losses on those same assets.

Bank notes in circulation represents approximately 23% (20% as at December 31, 2020) of the Bank’s total liabilities. Bank notes in circulation increased by 8% to $115,155 million as at December 31, 2021, mainly reflecting an increase in demand during the year.

Deposits consists of deposits made by the Government of Canada, members of Payments Canada and others. The balance declined by 20% to $347,034 million as at December 31, 2021, compared with December 31, 2020. While deposits are normally maintained at a lower level, they now represent the largest liability on the Bank’s balance sheet. This change stems from the purchase programs the Bank implemented in 2020 to support the Canadian economy and financial system. This balance has declined, compared with December 31, 2020, reflecting the tapering of the Bank’s extraordinary market operations.

Securities sold under repurchase agreements increased to $35,560 million as at December 31, 2021, compared with December 31, 2020. This liability represents the repurchase price for securities repo operations undertaken to support the functioning of financial markets. These operations provide a temporary source of Government of Canada nominal bonds and treasury bills to primary dealers to support liquidity in the securities financing market.

Equity includes $5 million of authorized share capital, a $25 million statutory reserve and a special reserve of $100 million. The special reserve is meant to offset potential unrealized valuation losses due to changes in the fair value of the Bank’s investments that are measured at fair value through other comprehensive income. Equity also includes an actuarial gains reserve of $43 million as at December 31, 2021. This reserve accumulates the net actuarial gains and losses on the Bank’s post-employment defined-benefit plans that the Bank recognizes following the transition to International Financial Reporting Standards in 2010. The largest reserve held by the Bank is the investment revaluation reserve, which sits at $435 million as at December 31, 2021. It represents the unrealized fair value gains in the Bank’s investment in the Bank for International Settlements (BIS). Refer to Note 14 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  2021   2020  
Interest revenue 4,022  3,378 
Interest expense (923) (794)
Net interest revenue 3,099  2,584 
Dividend revenue
Other revenue
Total income 3,115  2,590 
Expenses 714  626 
Net income 2,401  1,964 
Other comprehensive income (loss) 409  (143)
Comprehensive income 2,810  1,821 

Comprehensive income increased by 54% in 2021 compared with the same period in 2020. The main drivers for this growth were the increased revenue from a larger average amount of financial assets held by the Bank throughout the year as well as higher returns on assets held by the Bank’s net defined-benefit plans, coupled with an increase in discount rates.1

Interest revenue depends on 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 earned on its investments and SPRAs. In 2021, interest revenue increased by $644 million (or 19%) over 2020. This increase was due to the greater average volume of assets held by the Bank throughout the year.

Interest expense consists mainly of interest incurred on deposits held by the Bank. During the year, interest expense increased by $129 million (or 16%) compared with the same period in 2020. The increase was primarily the result of a larger daily average value of deposits being held at the Bank during the 2021 fiscal year, despite a lower deposit balance as at December 31, 2021, compared with December 31, 2020.

Dividend revenue increased by $9 million in 2021 compared with 2020. The BIS did not declare a dividend in 2020.

Expenses in 2021 increased by 14% compared with 2020. For the most part, this reflects increases in staff costs and in expenditures related to bank notes.

  • Staff costs increased by $40 million (or 12%) during the year, compared with the same period in 2020, as a result of the following changes:
    • Benefit costs associated with the Bank’s defined-benefit plans increased by $25 million (or 21%) during the year, mainly because of a decrease in the discount rates used for their calculation.2
    • Salary costs also increased by $15 million (or 7%) during the year as a result of positions being filled for new mandates as well as the annual compensation adjustment.
  • Bank note research, production and processing expenses were $32 million (or 63%) higher during the year compared with 2020. This increase was driven by higher volumes of bank notes being printed. The timing of bank note production varies from one year to the next based on the annual production plan and market demand.

Other comprehensive income for the year was $409 million. It consisted of remeasurement gains of $422 million on the Bank’s defined-benefit plans, offset by a decrease of $13 million in the fair value of the Bank’s investment in the BIS during the year. The remeasurement gains on the Bank’s defined-benefit plans are mainly due to an increase both in the return on plan assets and in the discount rate used in the actuarial valuation.

Looking ahead through 2022

The Bank’s 2022 plan
(in millions of Canadian dollars)
2021 budget 2021 actuals 2022 budget
For the year ended December 31 $ % % $ %
Staff costs 350 47 363 51 407 53
Bank note research, production and processing 91 12 83 12 55 7
Premises costs 36 5 34 5 32 4
Technology and telecommunications 109 14 95 13 101 13
Depreciation and amortization 60 8 67 9 71 10
Other operating expenses 104 14 72 10 100 13
Total expenditures 750 100 714 100 766 100

The year 2021 was the last year of the Bank’s 2019–21 medium-term plan, Leading in the New Era. The Bank’s financial management framework supports strategic planning and enables decision making for allocating resources to achieve the Bank’s objectives, to mitigate risks and to invest in the Bank’s people and tools in a prudent fiscal manner. The framework was updated in 2021 to better align the needs for financial management with the Bank’s financial reporting structure.3

In 2021, the Bank did not spend its full budget, mainly due to ongoing delays in projects. This resulted in revised workplans and shifting some expenditures to future years. Outside of Staff costs, which represents the largest portion of the Bank’s core expenditures, other expenditures include the cost of enhancing systems and tools to support operations to sustain the Bank’s resilience posture and prepare for the future. The expenditures are also put toward supporting the Bank’s new mandates, continuing the Bank’s digital transformation and reducing the Bank’s risk.

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 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 on 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.

Risk analysis

The Risk management section provides an overview of the Bank’s 2021 risk management activities and achievements. It also reviews in detail the key areas of risk—strategic, operational, financial, and environment- and climate-related. The financial risks are discussed further in the notes to the December 31, 2021, financial statements. The pandemic has heightened financial risks, especially the Bank’s exposure to interest rate risk.

  1. 1. The net defined-benefit liabilities are measured using the discount rate in effect at the end of the period. The rate applicable to the net defined-benefit liabilities as at December 31, 2021, ranged from 2.6% to 3.1% (from 1.9% to 2.7% as at December 31, 2020). See Note 12 in the financial statements for more information.[]
  2. 2. 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, 2020, was used to calculate the benefit expenses for 2021). 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 2.9% to 3.2% for 2020 and from 1.9% to 2.7% percent for 2021. The increase in discount rates as at December 31, 2021 (see footnote 1), will result in decreased benefit costs for 2022, all else being equal.[]
  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.[]