Reserve banks post 22% lower earnings in 2018; $3.2 billion paid to reduce capital surplus under EGRRCPA

Payments to CFPB down 41.2%

Federal Reserve banks saw their earnings drop by nearly 22% in 2018 – or $17.6 billion — from the previous year, to $63.1 billion, the central bank reported Friday.

In the Federal Reserve System’s annual financial statements for 2018, the agency reported that the total assets for the 12 Federal Reserve banks at the end of 2018 were $4.1 trillion, a drop of $392.1 billion from 2017. According to the report, the assets were primarily composed of $4.0 trillion of U.S. Treasury securities and federal agency and government-sponsored enterprise mortgage-backed securities acquired through open market operations.

The banks provided for remittances to the Treasury of $65.3 billion in 2018, the report noted. That included two lump-sum payments totaling about $3.2 billion, which the report said were necessary to reduce aggregate bank capital surplus to $6.8 billion (required under the Bipartisan Budget Act of 2018 and the Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA, S. 2155), also of 2018).

The report stated that interest income on securities acquired through open market operations was $112.3 billion, down $1.3 billion (1.14%) from 2017. Interest expense on depository institutions’ reserve balances in 2018 was $38.5 billion, up $12.6 billion (48.6%). Interest expense on securities sold under repurchase agreements (repos) was $4.6 billion, up $1.2 billion (35.3%).

Reserve bank operating expenses were $7 billion, the report stated, including assessments of $2 billion for Federal Reserve Board expenses, currency costs, and the operations of the Bureau of Consumer Financial Protection (CFPB). The banks sent $337 million to the CFPB in 2018, the report states, compared to $573 million in 2017 (a drop of $236 million, or 41.2%).

Federal Reserve System publishes annual financial statements