Financial results
Overview
This section provides the key highlights of the Bank of Canada’s (the Bank) financial results for the year ended December 31, 2024. These highlights should be read with the financial statements and accompanying notes for the year ended December 31, 2024. Management is responsible for the information presented in the Annual Report.
After the onset of the COVID‑19 pandemic, the Bank has used extraordinary measures to restore the proper functioning of financial markets and support the economic recovery. In response to high inflation following the reopening of the Canadian economy, the Bank rapidly raised its policy rate and undertook quantitative tightening (QT), in which maturing bond holdings are not being replaced. As inflation eased, the Bank began lowering the overnight rate in June 2024 while continuing its policy of balance sheet normalization. On January 29, 2025, the Bank announced its plan to complete its balance sheet normalization, ending QT. Beginning in early March, the Bank will begin purchasing assets as part of normal balance sheet management. Asset purchases will begin with the restart of the regular term repo operations program, followed by Government of Canada treasury bill purchases 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 December 31 | 2024 | 2023 |
| Assets | ||
| Loans and receivables | 19,462 | 6 |
| Investments | 236,868 | 292,341 |
| Derivatives—indemnity agreements with the Government of Canada |
19,786 | 23,406 |
| All other assets* | 1,127 | 1,023 |
| Total assets | 277,243 | 316,776 |
| Liabilities and deficiency | ||
| Bank notes in circulation | 121,298 | 119,430 |
| Deposits | 164,359 | 196,212 |
| Securities sold under repurchase agreements | - | 6,638 |
| Other liabilities | 298 | 342 |
| Deficiency | (8,712) | (5,846) |
| Total liabilities and deficiency | 277,243 | 316,776 |
* 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 value of the assets on the Bank’s balance sheet has declined due to the Bank’s QT measures. The total assets decreased by 12% during the year to $277,243 million as at December 31, 2024, compared with their value as at December 31, 2023. The main driver of this decrease was the maturity of investments, which was partially offset by an increase in Loans and receivables.
Loans and receivables increased by $19,456 million as at December 31, 2024, compared with December 31, 2023, due to overnight repo transactions that took place on that day. Overnight repo operations are conducted to support the effective implementation of monetary policy by injecting liquidity on an overnight basis.
Investments decreased by 19% compared with December 31, 2023, to $236,868 million as at December 31, 2024. 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 $49,132 million during 2024. This decline is mainly due to the bonds maturing. This resulted in a decline of $33,955 million in Government of Canada bonds held at fair value and a decline of $15,177 million in Government of Canada bonds held at amortized cost.
- The Bank engages in repo operations, which provide market participants with a temporary source of Government of Canada securities and provincial bonds on an overnight basis. These operations also improve the availability of the Bank’s holdings of Government of Canada securities. The Securities Repo Operations program was discontinued on October 1, 2024, and was replaced by the Securities Lending Program (SLP), which was launched on October 2, 2024.1 As a result, all operations that were outstanding as of December 31, 2023, matured in 2024, resulting in a decrease of $6,652 million in securities lent or sold under repurchase agreements, compared with December 31, 2023. The SLP, which is designed to support the liquidity of Government of Canada securities markets, resulted in $2,796 million of Government of Canada securities being lent as at 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 $19,786 million balance represents the fair value of the derivatives associated with the net unrealized losses on these assets as at December 31, 2024. Derivatives decreased by $3,620 million during the year, mainly due to a slight decline in long-term bond yields and holdings. This is represented in the asset profile chart by “All other assets.”
Bank notes in circulation represents approximately 42% (37% as at December 31, 2023) of the Bank’s total liabilities. Bank notes in circulation increased by 2% during the year to $121,298 million as at December 31, 2024. This increase mainly reflects market demand during the year.
Deposits consists of deposits made by the Government of Canada, members of Payments Canada and others. This balance declined by 16% to $164,359 million as at December 31, 2024, compared with December 31, 2023, reflecting continued balance sheet normalization.
Securities sold under repurchase agreements were reduced to $nil during the fourth quarter of 2024, as a result of the discontinuation of the Securities Repo Operations program on October 1, 2024.
Deficiency increased to $8,712 million as at December 31, 2024, as a result of comprehensive losses of $2,866 million for the year. As at December 31, 2024, the accumulated deficit was $9,817 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 $547 million and an actuarial gains reserve of $453 million, each as at December 31, 2024. Refer to Note 14 in the financial statements for more information.
Results of operations
| Condensed results of operations (in millions of Canadian dollars) |
||
|---|---|---|
| For the year ended December 31 | 2024 | 2023 |
| Interest revenue | 3,620 | 3,850 |
| Interest expense | (6,017) | (8,826) |
| Net interest expense | (2,397) | (4,976) |
| Other revenue | 23 | 14 |
| Total loss before operating expenses | (2,374) | (4,962) |
| Total operating expenses | (705) | (690) |
| Net loss | (3,079) | (5,652) |
| Other comprehensive income (loss) | 213 | (97) |
| Comprehensive loss | (2,866) | (5,749) |
The Bank incurred a net loss of $3,079 million for the year, primarily because the interest expense incurred on deposits was greater than the interest earned on investments. This net interest expense on deposits was a result of the Bank increasing its policy rate from 0.25% in the first quarter of 2022 to a peak of 5.00% in the third quarter of 2023 before gradually reducing it to 3.25% in the fourth quarter of 2024. 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 (if any) and on assets acquired through large-scale asset purchase programs. In 2024, interest revenue decreased by $230 million (or 6%) compared with 2023. This decline was the result of the Bank’s lower average holding of interest-yielding investments throughout the year, which was partially offset by a slight increase in the average yield on investments.
Interest expense consists mainly of interest incurred on deposits held by the Bank. During the year, the interest expense decreased by $2,809 million (or 32%) compared with 2023, resulting from a lower average volume of deposits and a decrease in interest rates during the year.
Operating expense in 2024 increased by $15 million (or 2%) compared with 2023. This primarily reflects an increase in costs for staff and for technology and telecommunications; the increase was partially offset by a decrease in costs for bank note research, production and processing as well as for other operating expenses.
- Staff costs increased by $63 million (or 19%) during the year, compared with 2023, as a result of the following:
- Salary costs increased by $20 million (or 8%) because positions were filled to deliver the Bank’s core functions, including the new function of retail payments supervision, and due to annual compensation adjustments.
- Benefits and other staff costs increased by $43 million (or 55%), primarily due to growth in current costs related to the Bank’s defined-benefit pension plans and increased premiums for health benefits. The Bank’s deferred employee benefits related to the defined-benefit pension plans increased due to a change in the discount rate (the interest rate used to calculate the present value of future pension payments to employees).2 As market interest rates fluctuate, the discount rate is adjusted accordingly in the calculation.
- Bank note research, production and processing expenses decreased by $42 million (or 81%) compared with 2023. This decrease was driven by a decline in the volume of bank notes being printed, which varies from one year to the next based on the annual production plan and market demand.
- Technology and telecommunications costs increased by $13 million (or 12%) compared with 2023. This increase was driven by the Bank’s continued focus on strengthening the resilience of its information technology systems and by technology costs to build the Bank's new retail payments supervision system.
- Other operating expenses decreased by $16 million (or 21%) compared with 2023. This decline was driven primarily by the completion in 2023 of the Bank’s outsourced operational contract for the Unclaimed Properties Office and the Bank’s shift to internal solutions for 2024.
Other comprehensive income for the year was $213 million. It includes a remeasurement gain of $129 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.3 It also includes an $84 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 | 127 | 16 |
| Depreciation and amortization | 72 | 9 |
| Other operating expenses | 82 | 10 |
| Total operating expenses | 787 | 100 |
The year 2025 represents 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.4
Staff costs continues 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 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.
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.
- 1. The SLP provides market participants with a temporary source of Government of Canada nominal bonds and treasury bills. As part of this program, the Bank makes a portion of its holdings of these securities available on an overnight basis through daily securities lending operations.[←]
- 2. Deferred employee benefits (DEB) are primarily retirement benefits that employees have earned during their time at the Bank but will receive in the future, after they retire or leave. To estimate the DEB, several assumptions are used, one of which is the discount rate. The discount rate is an interest rate used to calculate the present value of future pension payments. The discount rates used to calculate the pension benefit plans and other benefit plan expenses ranged from 5.0% to 5.1% for 2023 and were 4.6% for 2024. This decrease will result in increased benefit costs for 2024, all else being equal.[←]
- 3. 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 obligation as at December 31, 2024, was a range of 4.6% to 4.8% (4.6% as at December 31, 2023). See Note 12 in the financial statements for more information.[←]
- 4. 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.[←]