Bank Board decides to use 2019 profit to cover accumulated loss

The Bank Board of the Czech National Bank today discussed the financial statements and financial report for 2019 and decided to use last year's profit of CZK 57.9 billion to cover the accounting loss of previous years. The rest of the accumulated loss of CZK 129.2 billion will remain in the CNB's balance sheet as a loss accumulated over previous periods.

The Bank Board's decision is based on law which stipulates the obligation to use profits preferentially to cover past losses. The Bank Board also stated that last year's profit was largely of an unrealised, accounting nature, as it had been generated largely from the revaluation of the CNB's equity portfolio on the basis of the growth in stock markets recorded last year. In addition, this profit is highly volatile, as the equity continues to be held by the CNB and is thus exposed to changes in market trends, including the current stock market fall linked with the coronavirus epidemic. 

Last year's profit of CZK 57.9 billion was due mainly to returns on international reserves management, which predominated over the costs of monetary policy operations. Equity portfolios, including dividend income, became the most profitable class of the CNB's international reserves in 2019. 

Unlike in previous years, the change in the koruna value of foreign-currency assets and liabilities stemming from exchange rate movements had no fundamental influence on the profit. The koruna appreciated slightly year on year against the euro, in which the bulk of the reserves are invested. By contrast, it depreciated against the other reserve currencies. The resulting effect was therefore a slight exchange rate loss.

The costs of monetary policy operations increased as domestic inflation pressures and inflation staying in the upper half of the tolerance band of the CNB's inflation target led to a further rise in the key monetary policy interest rates of 25 basis points in May 2019.

The CNB will publish the annual financial report for 2019 and the financial statements for 2019 by 31 March 2020. 

Markéta Fišerová
Director of the Communications Division and CNB Spokesperson