Bank of Israel posts $1.6bn excess expense in 2000

It noted that most of its liabilities (commercial bank deposits at the central bank) are shekel-denominated while most of its assets are in foreign currency. The shekel in 2000 strengthened by 5.5 percent against the basket of foreign currencies to which it is pegged, by 2.7 percent against the dollar and 9.9 percent against the euro.

The central bank noted that unlike a business it does not operate according to profit and loss considerations. It added its results reflect certain limitations in monetary policy, including an exchange rate mechanism that required it in the past to intervene in the market by buying foreign currency and selling shekels.

Its foreign currency reserves stood at $22.8 billion at the end of 2000, up from $20.2 billion at the end of 1999. Income from its reserves in 2000 totalled 5.1 billion shekels compared with 3.1 billion in 1999.Interest paid to banks for their deposits totalled 4.3 billion shekels in 2000 compared with 5.4 billion in 1999 while interest payments on Makams held by the public fell to 2.7 billion shekels in 2000 from 2.9 billion in 1999. Makams are zero-coupon unlinked certificates of up to one year and are issued by the Bank of Israel to absorb liquidity. ($1 = 4.14 shekels).