Czech National Bank Reports Record Profit

Czech National Bank

The Czech National Bank’s profit grew to a record 91.9 billion crowns in 2020. In 2019 the central bank reported a profit of 57.9 billion crowns. The CNB previous highest profit was CZK 73.1 billion in 2013. A CNB spokesperson said that the CNB’s profits would be used to cover the accumulated accounting loss. At the end of last year, it amounted to 129.2 billion crowns.

Revenues from the management of foreign exchange reserves contributed the most to the CNB’s profit. “These were mainly due to capital gains stemming from price developments in foreign bond markets and positive valuation differences in equities due to the rise in stock indices that took place at the end of the year,” a spokesperson said.

According to the spokesperson, monetary operations on the free market, on the other hand, burdened the CNB’s operations with interest costs of CZK 23 billion. However, it was less than a year earlier, due to the impact of lower monetary policy interest rates.

According to the CNB, exchange rate differences did not significantly affect the financial result last year. “The aggregate exchange rate gain of 18 billion crowns is the result of a year-on-year weakening of the koruna against the euro and a strengthening of the exchange rate against the US dollar. ” the CNB said.

The central bank has long warned that generating profit is not its main task. That is the care for price and financial stability. The financial result is preliminary and does not include all additional operations for 2020, the bank said. Last year’s final economic result will be known only in the financial report published by the CNB in the spring.

The CNB’s favorable financial results for last year were driven by a weaker koruna, the development of stock indices, and the bond portfolio’s revaluation.

At the same time, Vice Governor Marek Mora recently commented on considering the transfer of the CNB’s profit to the state budget. According to him, this is a legitimate request, but at the moment, it is not possible. According to Mora, the CNB must prioritize losses from previous years and replenish the so-called reserve fund.

The CNB used the last year’s profit to partially cover the accounting loss from previous years, which thus fell to CZK 129.2 billion. “While maintaining the current approach, the only source of gradual amortization of accumulated accounting losses is the CNB’s future profits,” the bank said in its 2019 financial report. A member of the Bank Board, Aleš Michl, has long proposed the transfer of the CNB’s profit to the state budget.

“If the central bank’s profit were to cover the entire loss from previous years, a debate would probably open over the possibility of transferring the remaining profit to the state budget. However, the CNB’s profit for 2020 did not exceed the closed to the budget, “said Seidler. He added that according to the valid legislation, the central bank should transfer its profits to the state budget only if the profits are of a longer-term nature.

The CNB determines monetary policy, ensures financial stability, issues banknotes and coins, manages money circulation, payments, and bank settlements. It also supervises the banking sector, the capital market, insurance, supplementary pension insurance, credit unions, electronic money institutions, and foreign exchange supervision.