What is the Destination of the Monetary Authority’s Profits (or Losses)? The financial results of the Banco Central do Brasil as element of its relationship with the national treasury

Abstract

This article addresses the legal treatment of the income of the Banco Central do Brasil. The first section
describes the main aspects of a central bank’s balance sheet, its components and its importance as a source of
information on the monetary authority’s operations and financial situation. The second section addresses the
results of a central bank, indicating the items that impact on its formation (such as international reserves, repo
operations and National Treasury deposits). Models for distributing positive results and covering negative results
are indicated. In the Brazilian case, the Central Bank is entirely a government institution and does not have
the participation of private shareholders, so its results are, at some point, shared with the National Treasury.
The third section presents a brief evolution of the rules for calculating and allocating the results of the Banco
Central do Brasil. Finally, the fourth and final section presents the rules currently in force, pursuant to Law n.
13,820 of May 3, 2019, which establishes: i) a new methodology for calculating the result; ii) new parameters for
the transfer of positive results to the National Treasury; and iii) new mechanisms for covering negative results