The Reserve Bank's Earnings Are Down 37%

Glenn Stevens, RBA Governor. Photo: Getty

The Reserve Bank of Australia’s (RBA) annual earnings fell 37% last financial year, according to the central bank’s annual report.

This result supports the Coalition Government’s move to give the bank an $8.8 billion extra capital buffer.

The bank says the very low interest rate yields around the world also mean RBA earnings continue to be historically low.

Underlying earnings, which are net interest earnings less the bank’s operating costs, declined to $442 million in 2013/14 from around $700 million the previous two years.

The RBA notes that its reserve capital has been strengthened after absorbing continuing losses from the rise in the exchange rate of the Australian dollar.

Reserve capital had been at a very low level of $2.4 billion, or 3.6% of assets at risk.

The government’s decision to make a one-time grant to the Bank of $8.8 billion means that the rebuilding process was done in one step.

Capital reserves now represent the equivalent of 15.7% of assets at risk.

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