Central banks increased their contributions to the budget tripled in 10 years because of the crisis


The Central banks of eight developed economies in the world in 2015 has expanded the budgets of their States a total of $149 billion, estimated by The Wall Street Journal. For 10 years the aggregate amount of payments has more than tripled in 2005, it was $40 billion.

As writes the edition, with the onset of the global financial crisis, Central banks have spent trillions of dollars, yen, pounds and euros to buy bonds and loans of the banking sector in an attempt to reduce borrowing costs, accelerating inflation and spur economic growth. Rescuing the economy was very profitable, as loans and bond purchases has brought Central banks generous interest.

From 2005 to 2015, the Federal reserve system of the USA brought to the Treasury $700 billion in profits — more than any other Central Bank. In 2015 amounted to $117,2 billion, while in 2005 — three years before the crisis — $21.5 billion, the fed declined to comment.

To earn on crisis

On the one hand, the WSJ notes, the Central banks make money in exactly the same way as all other banks is at a lower rate and lend at a higher one.

To keep the key rate within the target, most Central banks in normal times increase the volume extremely short-term loans. The fed achieves similar results by buying small packets of short-term Treasury bills.

Because of the financial crisis, many commercial banks have stopped lending to each other, and there was the need for loans from the Central Bank, the newspaper said. Subsequently, the Central banks began buying large amounts of bonds under a quantitative easing program to lower long-term interest and to spur economic activity.

Central banks found themselves in an unusual position: they have the opportunity to support the lending of banks by issuing money. In this case they receive extra income through coupons and payments on account of repayment of securities. Most of this income, the WSJ notes, the Central banks sent to state Treasury.

The only Bank that pays the government a fixed amount and not a percentage of profits, is the Swiss Central Bank. Last year, he transferred to the Treasury $1 billion.

In the Eurozone, where Switzerland is not included, all national Central banks receive income from the quantitative easing policy of the ECB. Banks in countries with less developed economies, such as Italy, Portugal and Greece, listed in Treasury more money than their more affluent neighbors to the North, as the financial sector in these countries continues to require borrowing from Central banks. In particular, the Bank of Italy transferred €158 billion ($176,6 billion) against €21 billion 10 years ago. In Germany, by contrast, the liquidity of the financial sector is so high that banks almost do not need to the loans: in 2015, the EU has provided loans for €against 58 billion €204 billion in 2005, says the WSJ. Last year the Bank earned and transferred to the Treasury of €36 billion.

The amount of money that the Central banks of the Eurozone deduct the Treasury, depends on the rules adopted in each state. The Bank of France earned more retail sales to €50 billion, but sent to the Treasury only €32 billion And French Bank pays the corporate tax: almost 60% of this amount. Corporate tax also pay the Central banks of Italy, Portugal and Japan. The fed pays only the tax on real estate.

In some countries, including Switzerland, Japan, Greece and Belgium, Central banks are traded on exchanges, and part of their profits go to private investors.

To give 90%

The Bank of Russia last year transferred to the budget of 90% of the profits. So far, the Bank has transferred 75% of the profits, but because of the situation with the budget deficit have been enacted into law, raised the bar to 15 PP of the Central Bank, earned 112.6 billion rubles ($1.7 billion), sent to budget 101, 1 billion rubles ($1.6 billion). In 2005, the profit of the Central Bank amounted to 81.9 billion RUB.

“We have a situation depends on the actions of the Central Bank. The profit of the Bank of Russia is affected by two main factors: the volume of refinancing and liquidity sterilization. CB is more of refinancing, receives a percentage and earns. If the Central Bank absorbs excess liquidity, he pays interest to the banks. If earlier the volume of refinancing was large, we now turn to surplus liquidity, and in the following year, the Central Bank will sterilize more than provide. The second point: the revaluation reserves. When the weakening of the ruble has been significant reassessment of dollars into rubles has supported the profits of the Central Bank. In 2017, we do not expect any special rate fluctuations. We believe that compared to 2014, 2015-year profit will decline,” says chief economist of “Renaissance capital” Oleg Kuzmin.

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