Bank of Canada lost $522 million in third quarter, marking first loss in its history
OTTAWA –
The Bank of Canada misplaced $522 million within the third quarter of this 12 months, marking the primary loss in its 87-year historical past.
In the central financial institution’s newest quarterly monetary report, it says income from curiosity on its belongings didn’t hold tempo with curiosity fees on deposits on the financial institution, which have grown amid quickly rising rates of interest.
The Bank of Canada’s aggressive rate of interest hikes this 12 months have raised the price of curiosity fees it pays on settlement balances deposited within the accounts of huge banks.
That’s whereas the earnings the central financial institution receives from authorities bonds it holds stays mounted.
The Bank of Canada dramatically expanded its belongings in the course of the pandemic as a part of its authorities bond buying program. Also often known as quantitative easing, the coverage was a part of the central financial institution’s efforts to stimulate the financial system.
That growth in belongings is now costing the central financial institution, because it paid for the federal government bonds with the creation of settlement balances.
Speaking earlier than the House of Commons finance committee final week, Bank of Canada governor Tiff Macklem addressed the anticipated losses.
He stated losses do not have an effect on the central financial institution’s potential to conduct financial coverage.
He famous the scale and length of the losses will rely upon the trail of rates of interest and the evolution of the financial system.
“Following a period of losses, the Bank of Canada will return to positive net earnings,” he stated.
The Bank of Canada is seeking to the federal authorities for an answer to steadiness its books.
While there are just a few choices obtainable, some economists say the issue earlier than the central financial institution is basically an accounting one fairly than a financial coverage concern.
This report by The Canadian Press was first printed Nov. 29, 2022.
