Reserve banks end 2023 with expenses $114 billion higher than estimated earnings

Expenses were $114.4 billion higher than estimated earnings in 2023 for Federal Reserve Banks, the Federal Reserve said Friday – leading to an increase by $116.4 billion in a deferred asset for the banks – which totaled $133.0 billion at year-end.

According to a chart issued by the Fed, the cost of operations in excess of earnings for 2023 is the most, by far, recorded by the banks since 2014, and only the second time in that period that operations cost exceeded earnings (in 2022, when the excess was $16.6 billion).

The figures released Friday are preliminary financial results for the Reserve Banks, the Fed said.

In a statement, the Fed noted that Reserve Banks are required to remit excess earnings to the U.S. Treasury after paying for costs, which include those for operating, payments of dividends, and an amount necessary to maintain surplus. During  a period when earnings are not sufficient to pay for costs, a deferred asset is recorded, the agency stated.

“In 2023, the Reserve Banks increased the deferred asset by $116.4 billion resulting in a cumulative deferred asset at year-end of $133.0 billion,” the Fed reported. “The deferred asset is the amount of net excess earnings these Reserve Banks will need to realize before their remittances to the U.S. Treasury resume. A deferred asset has no implications for the Federal Reserve’s conduct of monetary policy or its ability to meet its financial obligations.”

The Fed also reported that, for Reserve Banks in 2023:

  • Interest income on securities acquired through open market operations totaled $163.8 billion in 2023, a decrease of $6.2 billion from 2022 interest income of $170.0 billion.
  • Total interest expense of $281.1 billion increased $178.7 billion from 2022 total interest expense of $102.4 billion; of the increase in interest expense, $116.3 billion pertained to interest expense on reserve balances held by depository institutions and $62.4 billion related to interest expense on securities sold under agreements to repurchase.
  • Total interest income earned on loans to depository institutions and other eligible borrowers, including from the Bank Term Funding Program and Paycheck Protection Program Liquidity Facility, was $10.4 billion.

Federal Reserve Board announces preliminary financial information for the Federal Reserve Banks’ income and expenses in 2023