The Bank of Israel publishes its financial statements for 2021
- The Bank of Israel fulfills the functions imposed on it as a central bank, and acts to achieve the objectives established for it under the Bank of Israel Law, 5770-2010: maintaining price stability and supporting growth, employment, the reducing of social gaps, and the stability of the financial system. The Bank’s activity to attain its objectives and to carry out its functions is not intended to maximize profits, but rather to achieve economy-wide economic goals.
- In 2021, similar to the preceding year, the main changes in the Bank of Israel’s financial statements derived from the tools operated by the Bank of Israel in the domestic markets to deal with the effects of the economic crisis that resulted from the COVID-19 pandemic.
- The tools operated by the Bank in 2021 include foreign exchange purchases, domestic government bond purchases, extending long-term monetary loans, and reverse repurchase agreements. The utilization of the said tools is the main factor in the growth of about 25 percent in the Bank’s balance sheet this year. This activity had a material effect on the Bank’s financial results this year as well, reflected in the scope of the Bank’s income from foreign exchange reserves (excluding exchange rate differentials), and from the domestic tools operated, but in parallel, also an increase in the Bank’s exposure to volatility in respect of exchange rate differentials, the result of the growth in the foreign exchange reserves.
- In the financial statements for 2021, the Bank implemented for the first time the rules of the international standard—the IFRS rules. This step brings the Bank forward to the use of an advanced and accepted international standard, which better reflects the business and economic reality, and helps in enhancing the trust and transparency in the Bank’s financial reporting.
- The Bank’s balance sheet at the end of 2021 totaled NIS 809 billion, an increase of approximately NIS 163 billion (25 percent).
- The balance sheet growth was primarily impacted by:
o Growth in the balance of assets abroad totaling approximately NIS 108 billion, mainly due to the Bank’s continued foreign exchange purchases, totaling NIS 112 billion (about $35 billion). The foreign exchange reserves ended 2021 at approximately NIS 662 billion (about $213 billion).
o Growth in the balance of assets in Israel totaling approximately NIS 55 billion, mainly as a result of the continued domestic-currency government bond purchase program totaling about NIS 39 billion, and the extending of long-term loans, totaling approximately NIS 20 billion, to the banking system in order to provide credit to small businesses.
- The said growth in the Bank’s assets was reflected in parallel growth on the liabilities side, in the monetary absorption instruments—term deposits and makam—totaling about NIS 137 billion, due to the need to absorb the excess liquidity created in the markets by the said purchases.
- In 2021, there was a loss of approximately NIS 20 billion. The income from the foreign exchange reserves excluding exchange rate differentials totaled about NIS 16 billion. Most of that derived from gains due to the rise in value of the equities, which were partly offset by revaluation losses of bonds as a result of the increase in yields toward the end of the year.
- In contrast, there were exchange rate differential expenses totaling about NIS 35 billion, due to a marked appreciation of the shekel vis-à-vis the euro and dollar.
- Due to the growth in the Bank’s foreign exchange reserves, the lion’s share of exchange rate differential expenses is not realized, and therefore a change in the trend in the value of the shekel vis-à-vis the currencies in the reserves portfolio could offset their effect.