Economics in a picture

Central banks’ income is mostly derived from their right to issue legal tender and traditionally can be easily related with its own monetary policy decisions. In the Eurosystem, however, profits of national central banks (NCBs) are driven by monetary policy decisions taken at an aggregate level, with possibly disproportionate impact on their net income. NCBs’ income may also be partly derived from other sources not directly related with monetary policy. 

In the first years of the Eurosystem, all income related with monetary policy was shared among NCBs in a proportional manner. Since 2009 there is however a non-shared component that has played an increasing role. This mainly stems from the large-scale purchases of public debt securities through the Public Sector Purchase Programme (PSPP) since 2015 and the Pandemic Emergency Purchase Programme (PEPP) since 2020. 

In the most recent years, Banco de Portugal’s profits have mainly benefited from this non-shared monetary income. This contribution has more than offset the reduction of shared monetary income that resulted from the negative impact of low policy interest rates on central banks’ income.

For further details see Cardoso da Costa and Silva (2023), “A novel decomposition of national central banks’ profits in the euro area: application to the case of Banco de Portugal”, Banco de Portugal Economic Studies, Vol. IX, No. 1, pp. 49-72.

Prepared by José Miguel Cardoso da Costa and Nuno Silva. The analyses, opinions and findings expressed in the article are those of the authors and do not necessarily coincide with those of Banco de Portugal or the Eurosystem.

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