The Federal Reserve's balance sheet ballooned in 2008, more than doubling in size, as the central bank ramped up funding to bail out the financial system, according to Fed data released on Thursday.

Combined assets in the Federal Reserve system reached $2.25 trillion on Dec 31, 2008, up $1.33 trillion from a year ago.

The surge in the Fed's balance sheet reflected the scope of its rescue of a financial industry battered by the global crisis.

The balance sheet increase resulted from loans of $595 billion to banks and other financial companies; a $530 billion increase in central bank liquidity swaps and a $412 billion increase in investments held in various financing vehicles, the Fed said in a statement.

The increase was offset by a $263 billion drop in the Fed's holdings in government securities.

(Reporting by Richard Leong, Editing by Chizu Nomiyama)