A currency deposit is a fixed investment instrument in which a specific sum of money with an agreed upon time and interest rate is deposited into a bank. An initial deposit is made in one currency and withdrawals are made either in the same currency or another agreed upon currency.
A dual foreign currency deposit is an investment vehicle tied to foreign currency exchange rates. Foreign currency deposits involve more risk because of the potential disparity between the value of the currency in which the money is deposited and the comparative value of the target currency.
Usually, the longer the duration of the currency deposit, the higher the interest rate given and, thus, the better chance an investor has of making a profit off of the investment. However, there is risk involved in not being able to access the deposit during the duration of the term.
Israel’s banks have been increasingly dependent on foreign residents’ foreign currency deposits, and the Israeli government offers tax incentives to overseas residents in order to encourage these deposits. Such benefits also extend to new immigrants and returning citizens, who are, under certain circumstances, exempt from paying taxes on the interest on foreign currency deposits.
The desirability of currency deposits in Israel is tied to the value of the Israeli shekel. As a result of the changes in the rate of exchange of the shekel to world currencies, there is usually a shekel income which is the difference between the value of the original amount invested by the overseas resident (in shekels) and the value of the (shekel) investment at later dates. In the fall of 2011, the shekel hit about a 12-month low—its value driven down intentionally by the Bank of Israel, Israel’s Central Bank, in order to help the country’s export industry.
In September 2011, the international credit rating agency Standard & Poor’s raised Israel’s long-term foreign currency credit rating from a to A+. In their yearly reports, Moody’s and Fitch maintained their previous ratings.
- Bank Hapoalim
- Bank of Jerusalem
- Bank Leumi
- First International Bank of Israel
- Mizrahi Tefahot
- Union Bank