Banka Slovenije’s financial performance in 2022
According to its financial statements, Banka Slovenije disclosed a surplus of income over expenses in the amount of EUR 1.75 million last year, in the wake of a decline in provisions for general risks. In accordance with the Bank of Slovenia Act, 25% of its surplus (EUR 437,293.79) is earmarked for the state budget, while the remainder (EUR 1.3 million) is transferred to Banka Slovenije’s general reserves.
With inflation having risen sharply, central banks last year opted for monetary policy normalisation. While inflation in the euro area had mostly been below its 2% target rate in the years leading up to the Covid-19 pandemic, it began to rise rapidly in mid-2021 and remains elevated. Although maintaining an expansive monetary policy during the years dominated by the health crisis was a key factor in mitigating the adverse impact of the Covid-19 pandemic on the economy and the financial system, the monetary policy reversal into tightening that followed had a negative impact on the financial performance of central banks in the Eurosystem and further afield.
The rise in key interest rates means that central banks are paying higher and higher interest rates on some of their liabilities, such as government deposits and deposits by banks, while some of their assets, such as public-sector and private-sector bonds purchased during the period of the health crisis are remunerated at significantly lower interest rates.
Banka Slovenije has been preparing for this situation for years now. Every year since 2007 we have transferred part of our profits into the reserves, or capital buffers. A portion of the capital buffers in the amount of EUR 138.5 million was used this year to cover losses from negative securities revaluations, which were driven by the rise in bond yields in 2022. From the perspective of creating adequate financial buffers, the total financial independence prescribed by law allows the central bank to perform its tasks even in periods when financial performance is more challenging.
Here we should reiterate that the primary objective of the ECB, and also of Banka Slovenije, is maintaining price stability, where any profits or losses are a side effect of these endeavours. The same applies to the national central banks. How a central bank generates its profits or losses, and what its income sources are, is explained in the following link.
Annual Report 2022 undergoing translation.