M. Hernandez Madrid

Madrid

Updated Wednesday, March 27, 2024-12:57

For the first time in its history, the Bank of Spain did not register a profit in 2023. It also did not have losses because

it released provisions worth 6,611.94

million euros, so it avoided the red numbers compared to profits of 2,402.6 million euros from the previous year.

The reasons, according to an article written by the governor,

Pablo Hernández de Cos,

on the bank's blog, lie fundamentally in the decisions taken by the European Central Bank (ECB). "The unconventional monetary policies of the last decade, in combination with the interest rate increases, started in 2022 to combat inflation, explain this novel situation," the article states. "The lack of profits will continue for some more years, but it does not in any way compromise the room for maneuver to fulfill our functions," adds De Cos.

Last year, the Bank of Spain had contributed 1,606.81 million euros to increase its provision cushion, which at the end of 2022 exceeded 33,000 million euros.

"A central bank has a balance sheet and an income statement, like companies. But, unlike them, its objective is not to make profits but to fulfill its mandate, in particular, to maintain price stability," explains the governor.

In any case, De Cos has recalled that the monetary policy of price stability is not conditioned by the income statement. He has insisted that this is a "transitory situation" and that the patrimonial solidity "will not be compromised at any time."

Due to the losses that the Bank of Spain had been recording, on November 1 it did not make any advance to the Treasury. Nor will it happen on March 1, when the remaining amount traditionally enters until 90% of its profit is reimbursed to the public coffers.

The impact of the release of provisions has alleviated the large decrease in total income, which in 2023 stood at 624.17 million euros, 79% less than the previous year.

Income and gold

Net interest income

was negative by 8.9 billion euros

, as interest expenses multiplied almost fivefold, to 27,527.56 million euros. On the other hand, interest income only increased by 87.4%, to 18,626.87 million euros.

In addition to the positive impact on income from the release of 6,611.94 million euros of provisions, we must also take into account the extraordinary effects of the redistribution of monetary income, which reached 3,146.75 million, 132% more.

The operating expenses of the Bank of Spain between January and December were 641.59 million euros, 8% more. By item, personnel expenses were 336.82 million, 5.4% more, while expenses on goods and services reached 203.54 million euros, 8.6% more. The

cost of banknote production

reached 74.08 million (+19.4%).

Virtually all of the Bank of Spain's provisions (26,974.29 million euros) were intended to cover financial risks (26,375.24 million). Likewise, they also had 471.27 million to cover operational property risks and another 104.08 million for death and retirement relief.

Gold holdings

at

the end of the year amount to 16,910.85 million euros, equivalent to 9,054 million troy ounces (31.1 grams, as opposed to normal ounces, which weigh 28.3 grams) of fine gold, valued at a market price of 1,867.83 euros per ounce. These holdings have not changed during the year. Its value is 1,464.47 million euros higher than that of 2022, as a consequence of the increase in the market price (at the end of 2022, the ounce was trading at 1,706.08 euros), this increase having been recorded within the revaluation accounts of the passive.