On 31 March 2023, the Ordinary Meeting of Shareholders approved the Bank of Italy's Annual Accounts for 2022. The balance sheet decreased by €61 billion, to stand at €1,477 billion. On the asset side, lending to euro-area credit institutions was the main item that decreased. On the liability side, banks' deposits declined while the negative balance in connection with the TARGET payment system increased.
Gross profit before tax and transfers to the general risk provision was €5,860 million, lower than the €9,181 million recorded in 2021.
This reduction was due, in particular, to write-downs on securities valued at market prices, mainly in foreign currencies, and to the contraction in net interest income. The latter was caused by the increase in the Eurosystem's key interest rates, which led to a substantial increase in interest expense, mainly on banks' deposits and on the negative TARGET balance, which was not offset by a corresponding increase in interest income on financial assets, which follow the rise in market rates more slowly.
The primary goal of the Eurosystem is to maintain price stability, not to generate a profit. This could temporarily lead to a reduction in the financial results of the central banks in some years before earnings gradually increase again. In particular, the decline in net interest income is set to worsen, which is expected to lead to gross losses for the Bank of Italy in 2023 and 2024, the amount of which may, however, be fully covered by available financial buffers.
To deal with this situation, in addition to the resources already built up in previous years, the general risk provision (which under the Bank of Italy's Statute covers its overall exposure to risk) increased by a transfer of €2,500 million, €500 million more than in the previous year. This allocation - which is consistent with the objective of strengthening financial buffers with regard to the size and composition of the balance sheet and the above-mentioned negative profit projections arising from the impact of the higher key interest rates - brings the provision to a total of €35,214 million.
Taxes for the year amounted to €1,304 million (€1,236 million in 2021).
Out of the net profit of €2,056 million (€5,945 million in 2021), €340 million were allocated to the shareholders in the form of dividends, the same amount as last year and still equal to 4.5 per cent of the capital. Moreover, the €40 million allocation to the special item set up for the long-term stabilization of the net profits to be paid to shareholders under the dividend policy in force was confirmed; as a result, the special item reached €280 million.
The amount assigned to the State is equal to €1,676 million, in addition to the taxes for the financial year.