(Communicated by the Bank of Israel Spokesperson)

The Supervisory Council of the Bank of Israel approved the Bank's financial statements for 2013, in accordance with Section 75 of the Bank of Israel Law, 5770–2010. Prior to approval, the Supervisory Council appointed from among its members a committee, which examined the Bank's financial statements and recommended their approval.

The Bank of Israel's balance sheet at the end of 2013 was about NIS 301 billion, compared with NIS 303 billion at the end of 2012—a decline of about 0.8 percent. The major decrease on the assets side derived from a decrease in the balance of tradable securities in local currency. On the liabilities side, the decrease was a result of a mixed trend of changes: banknotes and coins in circulation and domestic currency liabilities increased, yet at same time there was a decline in foreign currency liabilities and in the balance of the revaluation accounts.

In 2013, the Bank of Israel recorded income totaling about NIS 1.9 billion from foreign currency reserves, compared with about NIS 3.4 billion in 2012. This income does not include exchange rate differentials or the increase in unrealized gains from securities totaling about NIS 2.2 billion, which are reflected in the revaluation accounts on the balance sheet. The growth in unrealized gains was about NIS 0.2 billion in 2012. Interest expenses to the banks and to the public in respect of makam and term deposits totaled NIS 3.4 billion, compared with NIS 5.6 billion in 2012. The decline derived from a reduction of the shekel interest rate. The Bank recorded expenses from exchange rate differentials totaling about NIS 5.7 billion, compared with income of about NIS 1.7 billion last year. In 2013, these expenses derived from the appreciation of the shekel vis-à-vis the currencies in which the foreign exchange reserves are held, and contributed to growth in the total of other financial expenses and to a larger loss presented in the Bank’s profit and loss statement for 2013, which was about NIS 8.6 billion, compared to a loss of about NIS 1.2 billion in 2012. In addition, there was a decline in the revaluation account on the balance sheet, and the balance of unrealized exchange rate differentials declined by about NIS 11.7 billion.

In 2013, the Bank’s general and administrative expenses totaled about NIS 1.1 billion, compared to NIS 0.7 billion in 2012, an increase of about NIS 0.4 billion. Wages and employee rights expenses for Bank of Israel employees were about NIS 288 million in 2013, compared with about NIS 264 million in 2012. Pension and severance pay expenses were about 676 million in 2013, compared with about NIS 352 million in 2012. Most of the increase derived from the agreement indexing pensions to the Consumer Price Index, which was signed in 2014, which includes retroactive pension adjustments in respect of the years 2008–2013, and an increase in the Bank’s actuarial pension liabilities due to growth in the current pension payment. This agreement is in line with the pension indexing agreement signed in the public sector in 2008.
 
The financial statements are presented in accordance with generally accepted accounting principles (GAAP) adapted for activities particular to central banks, as is generally accepted in other central banks worldwide. In accordance with the Bank of Israel Law, the financial statements were audited by an external auditor, whose opinion is published as an attachment to the financial statements.
 
The Bank of Israel's financial results reflect the operations of the Bank as it aims to achieve its objectives stipulated by the Bank of Israel Law, including maintaining price stability, supporting growth, and supporting financial stability—and not with the aim of maximizing profits.
 
Bank of Israel Governor Dr. Karnit Flug said, “The Bank of Israel acts to achieve its objectives stipulated in the law, including maintaining price stability, supporting growth, and supporting financial stability—and not to achieve profits. The financial statements, by their very nature, do not indicate the benefit derived by the economy from the financial activities and monetary policy implemented by the Bank of Israel. The appreciation of the shekel, which caused most of the loss this year, reflects developments that are mainly the result of the relatively good state of the Israeli economy compared to other economies. It is precisely in an extreme scenario (which is of course not desirable), in which the state of the economy would be negatively impacted for some reason, that the Bank of Israel would record large profits in the balance sheet. The changes in the guidelines for managing the foreign exchange reserves, decided upon by the Monetary Committee, are expected to improve the Bank’s financial results over time.”