For the second year in a row, the Central Bank (BC) ended the year with a negative balance. After recording a loss of R$298.5 billion in 2022, the BC presented a loss of R$114.2 billion in 2023. The National Monetary Council (CMN) approved, in Brasília, on the 28th, the bank’s balance sheet referring to the last year.
In 2023, the loss of R$123 billion was attributed to foreign exchange operations, such as swaps (selling dollars on the futures market) and changes in international reserves. This is due to the 7.86% decline in the dollar last year, which results in losses when converting these foreign exchange operations into reais.
The loss in 2023 was not more significant because the Central Bank obtained an operating profit (gains from the execution of its activities) of R$8 billion in the same year. When adding the exchange rate and operational results, the final loss totaled R$114.2 billion.
central bank
In terms of coverage, due to the 2019 legislation that regulates the relationship between the Central Bank and the Treasury, there were changes in the allocation of the monetary authority’s profits. Of the total loss, the National Treasury will have to cover R$111.2 billion through public bonds. The remainder, R$3 billion, will be covered by reducing the BC’s assets.
The last positive result recorded by the BC was in 2021, when it obtained a record profit of R$85.9 billion. At that time, the Central Bank set up a profit reserve to compensate for possible losses in the following years. However, this reserve was completely used last year. In 2022, Complementary Law 179 changed the method for calculating BC results from semi-annual to annual.
The B.C.
The Central Bank, often abbreviated as BC, is a central and autonomous financial institution responsible for formulating and executing a country’s monetary and exchange rate policy. It plays a crucial role in regulating and supervising the financial system, as well as acting as the bank for commercial and government banks.
The main functions of the Central Bank include:
- Monetary Policy: The Central Bank controls the money supply and interest rate to achieve macroeconomic objectives such as price stability, economic growth and inflation control. It can adjust the base interest rate, buy or sell government bonds, and set bank reserve requirements to achieve these goals.
- Exchange Policy: The BC regulates the exchange market, intervening when necessary to stabilize the national currency in relation to other foreign currencies. It can buy or sell foreign currency, manage international reserves and implement policies to control exchange rate volatility.
- Financial Regulation: The Central Bank establishes and enforces regulations to ensure the soundness and stability of the financial system. This includes supervising banks, financial institutions and financial markets, as well as monitoring compliance with laws and regulations related to financial activity.
- Currency Issuance: The BC is responsible for the issuance and circulation of fiat currency, that is, legal tender notes and coins. He also oversees the production, distribution and authenticity of banknotes and coins in circulation.
- Government Bank: The Central Bank carries out financial operations on behalf of the government, manages its bank accounts, issues public debt securities and manages the financing of government activities.
These functions are crucial to the efficient functioning of a country’s economy and to ensuring financial stability and sustainable growth over time. The Central Bank generally operates independently of the government to ensure the objectivity and effectiveness of its policies, although its actions are subject to a framework of accountability and oversight by the legislative branch.
(With Agência Brasil).
