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Over the past year senior executives at Israel Discount Bank have attempted to calm investors, declaring that the bank is not investing in risky bonds. Sources at the bank said that most of its bond investments are in bonds issued by mortgage agencies guaranteed by the United States government. Alongside those investments, which total $2.9 billion, the bank also has about $320 million worth of much riskier bonds. The current value of those bonds already includes a write-down of about $100 million recorded in 2008 against the bank's equity account. In other words, at this point there has been no provisioning in the profit and loss statement. Discount manages those investments via its wholly owned subsidiary, Bank Discount New York.

Last week Discount New York published its 2008 financial report, which shows that the value of the American bank's securities portfolio shrank by $247 million in 2008, to $4 billion. Two factors contributed to this lower figure: the sale of securities, which netted the bank $12 million, and a decline in the value of the securities in the portfolio.

Some of the reduced values in the portfolio were recorded only in the bank's capital ledger, as they are considered temporary, while others were written off on the profit and loss statement and are reflected in the bank's results for the fourth quarter of 2008.

While some of the mortgage backed securities from federal agencies actually appreciated compared to their cost on the books, other parts of the portfolio, which were invested in different securities, lost ground.

Most of the loss in value in the part of the portfolio that the bank could sell, for which Discount New York provisioned at the end of 2008 originated in those abovementioned unidentified U.S. securities now worth about $320 million.

Another part of the portfolio that recorded a significant decline relative to its size consists of securities beyond America's borders. Those investments are valued at $141 million, but had been worth $10 million more. That part of the portfolio could include Israeli government bonds, but also bonds issued by developing countries where the risk is unclear.