Brazil’s Central Bank posts US$16.6 billion profit in 2021

RIO DE JANEIRO, BRAZIL – After posting record profits of R$469.6 (US$90.7) billion in 2020, the Central Bank earned R$85.9 billion in 2021. The National Monetary Council (CMN) yesterday, February 17, approved the institution’s accounts for last year.

Of the total R$85.9 billion profit, R$14.2 billion refer to foreign exchange operations, such as swaps (selling dollars in the futures market) and gains with international reserves. The remaining R$71.7 billion correspond to operating profit (gains from the exercise of activity) and will be transferred to the National Treasury by March 7.

Due to the new legislation regulating the Central Bank’s relationship with the Treasury, the allocation of the monetary authority’s profits has changed. Foreign exchange profits will be transferred to an internal reserve of the Central Bank that will increase the bank’s net worth and will be used to reduce future losses with foreign exchange operations, in case the dollar drops in the future.

The non-exchange profits are allocated to the Treasury. Until the first half of 2019, all of the Central Bank’s profit (foreign exchange and non-exchange) was transferred to the Treasury.

In a note, the Central Bank said that in 2021 it adopted new operations “in line with modern international practices.” Among them are the interest bearing time deposits, which totaled R$7 billion on December 31. Through these deposits, financial institutions voluntarily leave money with the Central Bank in exchange for remuneration, instead of only leaving compulsory (mandatory) deposits in the monetary authority’s account.

Liquidity Finance Lines (LFL) totaled R$1 billion by the end of last year in the forward modality. These loans are secured by financial assets and meet the liquidity needs of financial institutions. These lines involve both immediate liquidity operations (with a term of up to 5 working days) and term liquidity (with a term of up to 359 calendar days).