In 2021 the Banco de Portugal participated in national and international efforts to promote a robust, sustainable and inclusive recovery of the economy.

The establishment and implementation of the euro area monetary policy remained accommodative. The Banco de Portugal also intervened in the monetary policy strategy review, approved in July 2021, listening to the views of academia and civil society organisations. 

To ensure widespread access of the Portuguese population to more secure and efficient payment solutions, the implementation of the National Strategy for Retail Payments has been promoted, as well as the Bank’s involvement in the Eurosystem’s work on the digital euro.

Research focused on studying the implications of the pandemic on the Portuguese economy and financial system. In carrying out its role as advisor to the Government, the Banco de Portugal provided support to the Portuguese Presidency of the Council of the European Union, in particular in the Banking Union, digitalisation and sustainability dossiers.

As for safeguarding financial stability, the Banco de Portugal enhanced the monitoring of the banking sector and its main counterparties, namely households and firms. The Portuguese banking system improved its profitability, remained well capitalised and capable of financing households and firms.

The Banco de Portugal assessed how the institutions under its direct supervision adapted to the new requirements on conduct, organisational culture, and internal governance and control systems, analysed credit risk management and monitored plans to reduce non-performing assets. Together with the industry, it established the Forum on Cybersecurity and Operational Resilience (Fórum para a Cibersegurança e Resiliência Operacional – FICRO) and issued supervisory expectations as regards the management of climate and environmental risks.

The Banco de Portugal also continued to monitor the implementation of extraordinary measures put in place to support households and firms in the context of the pandemic. The Bank was given new powers to prevent money laundering and terrorist financing related to the registration and supervision of entities operating with virtual assets.

Acting as national resolution authority, for the first time, the Bank adopted mandatory minimum requirements for own funds and eligible liabilities (MREL) for the main institutions under its direct responsibility. 

At the end of 2021, the Banco de Portugal’s balance sheet totalled €219 billion, an increase of about €27 billion compared with 2020.

In 2021, developments in Banco de Portugal’s financial statements continued to be impacted by the response to the lengthening of the pandemic crisis. 

With regard to balance sheet developments, particularly noteworthy on the assets side were:

• an increase in monetary policy assets of €27 billion, reflecting (i) a €17.1 billion increase in the portfolio of securities held for monetary policy purposes, due to purchases of securities under the new Pandemic Emergency Purchase Programme (PEPP) and of securities from the public sector purchase programme (PSPP) and (ii) a €9.6 billion increase in refinancing operations; 
• the appreciation of gold by €808 million to a total of €19.8 billion;
• the shift in foreign reserves and euro assets, resulting from the taking advantage of yield opportunities offered by the market. 

Also, on the liabilities side:

• growth in the deposits of credit institutions with the Banco de Portugal of €26.9 billion, as a result of the significant liquidity injection resulting from monetary policy measures. This increase was accompanied by a decrease in general government current accounts held by the Banco de Portugal;
• the increase in banknotes in circulation: 8% in the Eurosystem as a whole.

Net profit for the year was €508 million, €42 million above what was budgeted for 2021.

To this contributed:

• the interest margin of €677 million, whose main components are interest income from securities held for monetary policy purposes (€845 million) and interest received on deposits of credit institutions (€147 million). Interest payable on refinancing operations to credit institutions was recognised to the sum of €385 million; 
• realised gains arising from financial operations and unrealised losses, €67 million.

Administrative expenses totalled €195 million, a decrease of €1 million compared with 2020. Staff costs decreased by 2% and supplies and services from third parties increased by 1%.

Net profit for the year made it possible to distribute dividends to the State to the amount of €406 million. Including income tax, €639 million was distributed to the State.