The CNB publishes annual financial report, ended 2018 with profit of CZK 1.8 billion
The Czech National Bank published its annual financial report today. The report shows that the CNB recorded a profit of CZK 1.79 billion in 2018. The profit was positively affected by depreciation of the koruna, caused mainly by developments on foreign financial markets. An increase in monetary policy interest rates had the opposite effect.
“The domestic currency depreciated against the main reserve currencies, and the increase in the koruna value of foreign currency assets and liabilities thus generated a foreign exchange profit totalling CZK 42 billion,” says the CNB’s annual financial report, which was approved today by the CNB Bank Board.
Conversely, growth in key monetary policy interest rates increased the cost of the CNB’s open market operations. Raising interest rates was consistent with achieving the CNB’s 2% inflation target, and fulfilment of the primary objective always has priority over the impacts on the CNB’s financial results.
The CNB’s overall profit was also significantly impacted by foreign exchange management, which was negatively affected by low returns on fixed-income instruments combined with a fall in stock markets. In previous years, the CNB profited mainly from growth in these markets in the area of foreign exchange management. That growth gradually petered out and all major stock markets weakened at the end of 2018. A partial correction of the stock market losses did not occur until January and February 2019.
The CNB originally published a loss of CZK 3.86 billion in its ten-day balance sheet as of 31 December 2018. After accounting for all additional operations, however, the above profit was reported. This was due mainly to a change in the accounting method, under which unrealised gains and losses arising from debt securities are no longer recorded in the balance sheet but enter the overall profit/loss directly. The valuation differences recorded before 2018 were reflected in an accumulated loss, which eliminated the originally reported loss of the current year.
The CNB used the 2018 profit to cover its accounting loss of previous years. The rest remains in the CNB’s balance sheet as accumulated losses of previous periods. The CNB expects to cover the accumulated losses from future profits. The CNB long recorded negative capital in the past without the fulfilment of the central bank’s statutory mandate of maintaining price stability and the mandate in its other areas of activities being put at risk.
Markéta Fišerová
Director of the Communications Division and CNB Spokesperson