Central Bank lost €795m last year, due to interest rate mismatch
The loss was a result of the monetary policy in the eurozone, with central banks buying government bonds during the Covid-19 pandemic at a very low, fixed rate of interest or yield.
The ECB raised interest rates by a total of 4.5pc from July 2022 onwards, in a bid to reduce the inflation sparked by Russia's invasion of Ukraine. This meant the low-yielding bonds on the Central Bank's balance sheet were being funded by paying interest at the ECB's new higher rate.
'This balance sheet structure and interest rate environment is forecast to reduce the Central Bank's income over a number of years and to result in losses in 2025, and potentially beyond,' according to the regulator's annual report, published today.
'While these losses are expected to be covered by the Central Bank's financial buffers, their full extent is uncertain and will depend on many factors, in particular the monetary policy set by the ECB's governing council to ensure price stability.'
In a blog post published alongside the report, governor Gabriel Makhlouf pointed out that a number of other central banks around the world also recorded losses last year, and said the financial position of the Irish central bank 'remains robust' despite the losses.
He pointed out that the Central Bank's role is not to make profits, but to maintain monetary and financial stability. Any surplus income it does generate is transferred to the Exchequer.
The bank has a provision for financial risks to cover this interest-rate mismatch on its balance sheet. Some €795.4m of this was used last year, compared to €132.1m in 2023.
The Central Bank built up this buffer when it generated substantial profits about a decade ago, driven by gains from selling assets bought in 2013 as part of the liquidation of the Irish Bank Resolution Corporation, the former Anglo Irish Bank. These were all sold by the end of 2023.
'Mindful that both the inflation and interest-rate environments could change markedly over time, realising interest-rate mismatch risk, the Central Bank retained the maximum allowable 20pc of its profits during this period, up until 2022,' the annual report points out.
At the end of last year, after using some of the provision to cover the loss, the Central Bank's financial buffers stood at €8.3bn, including capital and reserves of €6.2m and a general risk provision of just over €2bn.
Staff expenses increased at the Central Bank last year, following the implementation of a public sector pay agreement. The pay bill came to just over €248m, up from €223m in 2023.
The report shows that the number of staff earning between €210,000 and €240,000 a year increased from five to 11, while the number earning in excess of €240,000 per annum went from four to six.
The report also shows that the value of gold held by the Central Bank increased to €970m, up from €722m.
'Gold and gold receivables consist of coin stocks held in the Central Bank, together with gold bars held at the Bank of England and Banque de France,' the report says. 'The increase in the balance at year-end 2024 is due to an increase in the market value of gold holdings from the year-end 2023 to 2024.'
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Post
4 hours ago
- Business Post
What the Papers Say: O'Leary double windfall; Jamie Dimon says bond market will crack; Trump 50% steel tariff threat
10 am - Good morning from the Business Post newsroom. Editor Daniel McConnell here with your Saturday morning spin through the stories making the headlines in Ireland and across the world. Michael O'Leary unlocks double Ryanair windfall thanks to share price rise Ryanair's rising share price over the past month has delivered a double windfall to Michael O'Leary, the Irish Independent reports. The high-profile businessman has met a key condition to lock in a shares bonus worth around €128m after Ryanair stock closed above €21 for a 28th straight day on Thursday. As long as O'Leary is still in his job in July 2028, he now has a right to buy 10 million Ryanair shares at €11.12 each – less than half the current value. The rising share price also pays off in the short term for Mr O'Leary, lifting the value of the 44.1 million shares he already owns. That stake has increased in value by €128m since the start of May, as Ryanair shares rose from €20.43 each to €23.34 a share by Friday afternoon. Shares in Hvivo nosedive as it loses key contract and postpones another Shares in Irish clinical trials company Hvivo plummeted more than 47 per cent on Friday after the group told investors of the cancellation of a 'significant' contract and the postponement of another, the Irish Times reports. The company, which is listed in London, informed the market on Friday it had received notification of the cancellation of a 'significant human challenge trial', alongside the postponement of another, as well as the cancellation of a 'smaller study'. The share price closed down just over 46 per cent. Human challenge trials, where products are tested on humans in a controlled environment, make up a significant portion of the group's business. Jamie Dimon warns US bond market will 'crack' under pressure from rising debt Jamie Dimon has warned that the US bond market will 'crack' under the weight of the country's rising debt as he called on Donald Trump's administration to place America on a more sustainable trajectory. The JPMorgan Chase chief executive said on Friday that he had cautioned regulators: 'You are going to see a crack in the bond market.' He added: 'I'm telling you this is going to happen. And you are going to panic. I'm not going to panic. We'll be fine.' The warning from the head of the US's biggest bank about mounting risks for the US bond market — which sets borrowing costs for trillions of dollars in debt globally — underscores how Wall Street is growing increasingly uneasy about rising government debt levels. It comes as Congress is reviewing Trump's 'big, beautiful' budget bill, which if passed is broadly expected to markedly increase the federal deficit. Donald Trump says he will double steel and aluminium tariffs to 50% Donald Trump said he would double tariffs on steel and aluminium imports from 25 per cent to 50 per cent in a fresh escalation of his global trade war, the Financial Times reports. The US president unveiled the increased levies as he touted a $15bn partnership between Nippon Steel and US Steel at a rally in Pennsylvania, promising to erect a tariff 'fence' around domestic metals production. 'We're going to bring it from 25 per cent to 50 per cent, the tariffs on steel into the United States of America, which will even further secure the steel industry,' he told the crowd in West Mifflin. 'Nobody is going to get around that . . . At 25 per cent, they can sort of get over that fence. At 50 per cent they can no longer get over the fence.' The new levies will take effect from June 4, the president wrote in a Truth Social post following the rally. Trump has sought to revitalise America's industrial heartlands by aggressively targeting what he sees as dumping by foreign importers. In March, he slapped 25 per cent levies on steel and aluminium imports in one of the first broadsides of his global trade war. Musk exits Trump administration but claims Doge 'just the beginning' US president Donald Trump praised billionaire Elon Musk's efforts to cut federal spending during a joint press conference in the Oval Office on Friday, as the Tesla chief departs the administration after a chaotic tenure that saw the elimination of thousands of jobs and billions of dollars in contracts. Mr Musk, who headed the Department of Government Efficiency (Doge), disrupted numerous agencies across the federal bureaucracy but ultimately fell far short of the massive savings he had initially promised. A White House official said on Wednesday that Mr Musk would be leaving the administration. "Elon has worked tirelessly helping lead the most sweeping and consequential government reform programme in generations," Mr Trump said from behind the Resolute Desk, as Musk stood to his right, wearing a black Doge hat and a t-shirt that read "The Dogefather" in the style of the movie "The Godfather."
Extra.ie
4 hours ago
- Extra.ie
Galway City Council looking to lease former €8m cinema free of charge
Galway City Coucil have invited proposals for the redevelopment of beloved venue, Pálás. The arthouse cinema and cultural space, which opened in 2017 following a lengthy construction period, announced on social media late last year that they will be closing their doors for the last time at the end of February 2025. The cinema, located in the Galway docks, took to social media to confirm the closure, saying that while they worked hard to avoid the inevitable, they can no longer continue trading due to the rising costs and competition. Galway City Coucil have invited proposals for the redevelopment of beloved venue, Pálás. Pic: Facebook 'It is with deep regret that after seven years of trading, Pálás will be closing its doors at the end of February 2025,' the cinema wrote. 'To many, Pálás is more than just a cinema and we have loved being a part of the community. 'We are so proud of our incredible team, the partnerships we have forged and the loyal audience we have fostered for Irish, arthouse and independent films in Galway. 'We have worked hard to avoid this outcome but the stark reality is rising costs and the oversaturation of the Galway cinema market have made continued trading unviable, and we have taken the difficult decision to withdraw from the business.' The arthouse cinema and cultural space, which opened in 2017 following a lengthy construction period, announced on social media late last year that they will be closing their doors for the last time at the end of February 2025. Pic:'We intend to provide the best possible filmgoing experience until we close our doors and we look forward to welcoming audiences until then. We are forever grateful for all of the love and support you have shown us over the last seven years. Go raibh maith agaibh as bhur dtacaíocht leanúnach ar feadh na mblianta.' The cinema operated under element Pictures, the group that also operate the Lighthouse Cinema in Dublin 7. Located on Merchants Road, the now council-owned building currently accommodates 322 seats across its three screens, while also including a box office, café and bar space and office space. Galway City Council have said that the successful redevelopment applicant will have full operational use of the facility on a long-term lease without charge, with no further financial support provided. An independent commercial review provided three suggested options for the redevelopment of the building: Re-opening of the property as a cultural space featuring one operational cinema with other areas repurposed for community and cultural use. Re-purposing of the property to become more tourism focused with a focus on cultural tourism. Re-configuration of the property to operate as a mix of commercial space generating annual rents combined with allocation of space for community use The Council also says the expression of interest is not limited to these suggestions and invited those looking to apply to share any additional ideas. The property will be available to view on June 18, with interested parties invited to submit their proposals in advance.
Extra.ie
5 hours ago
- Extra.ie
John Magnier's wife: €15m deal was sealed over drinks...then we all had dinner together
The wife of billionaire John Magnier has told the High Court about the meeting she and her husband hosted at Coolmore Stud, in a bid to seal a deal for a neighbouring farm. Susan Magnier, 71, the daughter of legendary Irish trainer Vincent O'Brien said she had asked her staff to ensure there was dinner available for Barne Estate owners Richard Thomson-Moore and his wife Anna. The court heard how the couple were welcomed at the front door at around 8pm on August 22, 2023, and were shown into the open-plan kitchen-dining area, where the meeting was held around the long kitchen table, which can seat 16. John Magnier. Pic: Collins Courts Ms Magnier sat at one end of the table, while her husband was seated at the other, with selling agent John Stokes and farm manager Joe Holohan to one side, and the Thomson-Moores to the other. A member of staff served drinks, while another was ready to serve food if required, she said. Giving evidence by videolink, Ms Magnier said Mr Stokes had been told by her husband that the Thomson-Moores should come to Coolmore only if they wanted to do a deal to sell the 751-acre Tipperary property. Susan Magnier. Pic: OLIVIER LABAN-MATTEI/AFP via Getty Images The Magniers were preparing to travel to Brussels the following day, to watch their grandchildren compete in a show-jumping competition. 'My husband John would have told me that's what the hope was, that he could do a deal that night,' she said. Earlier yesterday, Mr Magnier, 77, had explained: 'I wasn't going to leave a bid of €15million on the table while I went off show-jumping with the grandchildren. Richard Thomson Moore and Anna Thomson Moore. Pic: Tom Honan 'That's the reason I went from €11.25million to €15million, so we would have absolute certainty, and that was the basis on which they came to the house.' Mr Magnier has sued Richard Thomson-Moore and the holding company of the Barne Estate shares, in a bid to secure the deal he contends was made to buy the land for €15million on August 22, 2023. Construction magnate Maurice Regan made a later bid of €22.5million for the farm, and the sale is on hold pending the outcome of the case. Ms Magnier said Anna Thomson-Moore made small talk, but 'never opened her mouth' about the land negotiations. She said the main business of the night was discussed between her husband and Mr Stokes. 'I know we finished up on €15million,' she said. After saying they were going to call the trustees and Mr Thomson-Moore's sister, she said Mr Stokes returned, closely followed by the Thomson-Moores. 'Mr Stokes came through the door first,' she said. 'He was very elated and said the deal was done. He was directly followed by the two Thomson-Moores, who were clearly delighted the deal was done,' she said. 'Everybody was happy. We all shook hands… I asked them would they stay for dinner, and they said they would.' The conversation over dinner was 'light and light-hearted', she said. Farm manager Joe Holohan, who has worked for Mr Magnier for more than 35 years, confirmed he was also at the meeting, and was 'honoured' to be asked. 'To be there at a deal being done by Mr Magnier and that – it was going down in history,' Mr Holohan said. He said Mr Magnier had admired the farm for many years, and that they went to see it immediately after Mr Stokes confirmed it was on the market. He recalled overhearing a phone conversation in the car between Mr Regan and Mr Magnier's son-in-law, David Wachman, after Mr Regan learned of the Coolmore 'deal' for the farm. He said of Mr Regan: 'He was giving out a lot. He said he would give €5million more for it. He was well agitated, I assure you.' Yesterday morning, Mr Magnier told the court Mr Regan outbid him for land right beside Coolmore on a previous occasion. He said Mr Regan now lived next door to him, saying: 'I hope we are going to be good neighbours… He's right beside us. I can see him from the bedroom window.' Mr Magnier said he visited Mr Regan after issuing legal proceedings against the Thomson-Moores. Mr Regan is not a party to the action. Mr Magnier said he was legally precluded from revealing what was said. 'He gave me some information I am not allowed to use… I have information that would be beneficial for me to use, gained at that meeting. I have not used it. I would like if I could bring into the open what was said there.' Defence barrister Martin Hayden queried why Mr Magnier had not challenged the wording of an exclusivity agreement and a tillage agreement, which were drawn up following the meeting of August 22. Neither referred to a binding agreement having been made on that date but mentioned that discussions were to take place between both sides, counsel said. 'I knew what happened on the 22nd, because I did it myself. I did not do this [the documentation],' Mr Magnier replied. He remained adamant that no mention was made at the meeting of a need for the estate's trustees to approve any deal. The case continues next week.
