As central banks go, the Bank of Israel is one of the world’s most successful, according to Central Banking, considered the world’s leading authority on the subject. The Bank’s efforts to improve bond yields during a period when government bond yields worldwide were falling, as well as its careful management of the Israeli economy, makes the BOI a “success story,” and qualifying it as a “reserve manager of the year.”
According to the publication, the BOI “has made breakthroughs in its sensitivity analysis of near-optimal portfolios, as well as making notable gains from its diversification strategy.” Foreign reserves have tripled since 2008, providing the Bank with the resources to expand investments. The BOI is a major investor in equities, with some 10 percent of its holdings invested in German, French, British, Swiss, Japanese and Hong Kong equities.
“Work is currently under way to enable the central bank to invest in other developed markets in 2017,” Central Banking said, providing the Bank with new income streams. Other successes included savvy management of index-linked bonds and positive results in trading foreign currency. Overall, Central Banking said, the BOI is very diversified, and “the results of the Bank of Israel’s diversification strategy appear to be paying off,” the publication added.
Commenting on the award, Bank of Israel chairperson Karnit Flug said that the BOI “appreciates the compliments on its hard work. The low yields on investments in world markets required us to increase yields, while ensuring sufficient liquidity. The BOI, like central banks worldwide, has widened the number of tools it uses in order to meet the challenges of the modern financial world.”