The Bank of Israel’s financial statements are presented in accordance with generally accepted accounting principles (GAAP) adapted for activities particular to central banks. The 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—consistent with the practice of other central banks worldwide.

The Bank of Israel’s balance sheet is characterized by a currency imbalance, which impacts the Bank’s financial results, due to the fact that the major portion of the Bank’s assets are denominated in foreign currency, while most of its liabilities are in shekels.  The balance sheet at the end of 2014 was about NIS 351 billion, compared to NIS 301 billion at the end of 2013—an increase of about 16.5 percent.
The major increase on the assets side derived from the foreign currency reserves portfolio managed by the Bank, which increased by about NIS 50 billion in 2014 due to foreign currency purchases, the effect of the depreciation of the shekel on the shekel value of the reserves portfolio, and the return on it. On the liabilities side, the most significant increase was that of the balance of the revaluation accounts, mostly as a result of the effect of the shekel’s depreciation on the shekel value of the foreign currency reserves. Due to the accounting rules customary at central banks, profits are not realized as a result of the revaluation of tradable securities to their fair value or from exchange rate differentials on foreign currency reserves, attributed to the revaluation accounts, and are not credited in the Statement of Operations.[1] In addition, the balance of banking corporations’ deposits in local currency increased, as did the balance of banknotes and coins in circulation.
In 2014, the Bank of Israel recorded income totaling about NIS 2.4 billion from foreign currency reserves, compared with about NIS 1.9 billion in 2013. This income does not include an increase in unrealized gains from securities totaling about NIS 1.9 billion (mainly a result of the increase in the value of the foreign shares portfolio) or an increase in unrealized exchange rate differentials totaling about NIS 22 billion (as a result of the shekel’s depreciation), both of which are reflected in the revaluation accounts on the balance sheet. The Bank recorded expenses in respect of exchange rate differentials totaling about NIS 1.2 billion, compared with expenses of about NIS 5.7 billion last year. Interest expenses to banks and to the public in respect of makam and term deposits declined from about NIS 3.4 billion in 2013 to about NIS 1.8 billion in 2014, a result of the decline in the shekel interest rate.
In 2014, the Bank’s general and administrative expenses totaled about NIS 0.7 billion, compared to NIS 1.1 billion in 2013, a decline of about NIS 400 million. Most of the decline derived from lower pension and severance pay expenses, which totaled about NIS 256 million in 2014, compared with about 676 million in 2013. The increase in 2013, part of which was actuarial, derived from the agreement indexing pensions to the Consumer Price Index, which was signed in 2014 and applied retroactively in line with the pension indexing agreement signed in the public sector in 2008.
These trends led to a smaller loss presented in the Bank’s Statement of Operations for 2014, totaling about NIS 1.1 billion, compared with a loss of about NIS 8.6 billion in 2013.

To Full Report (Hebrew)
[1] In contrast, negative revaluations are debited on the Statement of Operations.