Central Bank Profits Decline in 2020

June 15, 2021
Sarah Gormley

On Wednesday, June 2, the Central Bank of Ireland published the 2020 Annual Report and Annual Performance Statement. The bank reported a profit decline of 67% in 2020. These reports state that total profit fell €829.6 million from €2.56 billion in 2019.

One of the major requirements of the Central Bank is to transfer 80% of their earnings to the exchequer. With a profit decline of 67% in 2020, the exchequer dividend fell at the same rate, putting the exchequer dividend at €665.7 million. With a decline from over €2 billion paid in 2019, this is considered to be the lowest since the beginning of the financial crisis.

The Central Bank of Ireland promoted the release of the 2020 Annual Report and Annual Performance Statement on Twitter with statements from Governor Gabriel Makhlouf including that “resilience was particularly important to ensure the financial system absorbed and did not amplify the COVID-19 induced shock and was ready for the economic recovery.” Governor Maklouf also makes it a point to say that the Central Bank and their EU colleagues worked closely to respond to the COVID-19 pandemic while also contributing to the European Central Bank’s (ECB) review of its monetary policy strategy at the same time. This teamwork contribution to the ECB review was not only a part of 2020 but has continued into 2021. 

While the COVID-19 pandemic has been a huge source of stress for the Central Bank, the financial crisis and the departure of the UK from the EU towards the end of January 2020 added additional stress. Within the first years of the financial crisis, a majority of the Central Bank’s profits were from interest paid by lenders. This interest was for emergency liquidity to prevent lenders’ downfall. In the past eight years, this has changed. The earnings during this time have been from bonds received by the Central bank in the year 2013. Bonds from the restructuring of the State bailout of the no longer functioning Irish Nationwide Building Society (INBS) and Anglo Irish Bank were given to the Central Bank in 2020. In February 2020, the Central Bank received €25 billion in government bonds due to the INBS and Anglo Irish Bank’s successor company, the Irish Bank Resolution Corporation (IRBC) being liquidated.

Bond prices and market interest rates have an inverse relationship, meaning that bond values rise and interest rates decline. This relationship has allowed the Central Bank to make large profits from selling the bonds at the price to which they were issued. The largest buyer of the IRBC-linked bonds has been the National Treasury Management Agency (NTMA). At the end of May 2021, the Central Bank had sold 74% of the €25 billion government bonds to the NTMA. The bonds have been selling so well and have made so much profit for the Central Bank recently that the EBC has placed pressure on them to sell the IRBC-linked bonds at a rather gradual pace. The goal of this is to remove worries that monetary financing is occurring, which is prohibited in the European Union. With the ECB holding power in this relationship, the Central Bank will have to follow their call-to-action and slow the selling of these bonds whether they like it or not.

With all factors considered, it is hard to tell what the future holds for the Central Bank. Will the bank’s profit begin to decline or will it be able to increase in the following months of 2021?



Brennan, Joe. “Profits Slump by 67% at Central Bank.” The Irish Times, The Irish Times, 2 June 2021, www.irishtimes.com/business/economy/profits-slump-by-67-at-central-bank-1.4581417.

News, RTÉ “Central Bank Reports Lower Financial Profits for 2020.” RTE.ie, RTÉ, 2 June 2021, www.rte.ie/news/business/2021/0602/1225564-central-bank-reports-lower-financial-profits-for-2020/.

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