Bank of Israel

Bank of Israel בנק ישראל (Hebrew) بنك إسرائيل (Arabic)
Bank of Israel logo
Headquarters	Jerusalem
Central bank of	Israel
Currency	New Israeli sheqel
ISO 4217 Code	ILS
Base borrowing rate	0.75%
Base deposit rate	2.00%
Website	www.bankisrael.gov.il

The Bank of Israel (Hebrew: בנק ישראל‎ Arabic: بنك إسرائيل‎) is the central bank of Israel. It is located in Kiryat HaMemshala in Jerusalem, with a branch office in Tel Aviv. The current governor is Stanley Fischer.

History

Bank of Israel in Jerusalem

At independence in 1948, the power of note issuance was vested with the Anglo-Palestine Bank, which was refounded as Bank Leumi in 1950. Monetary policy and banking supervision remained controlled by the Ministry of Finance.

The Bank of Israel was founded on August 24, 1954, when the Knesset passed the Bank of Israel Act, which ceded the currency issuing and regulatory functions of the Ministry of Finance to the newly formed Bank. Control over foreign currency exchange was not given to the bank until 1978. The Bank was made completely independent in 1985 and since 1992, the Bank manages its monetary policy so as to meet the inflation target set by the Israeli government - which is today a range of between 1 and 3 percent per annum, considered as price stability. Additionally, the Bank manages the Foreign Exchange Reserves.

In 2010, The Bank of Israel was ranked first among central banks for its efficient functioning, according to IMD's World Competitiveness Yearbook.

Governors of the Bank

• David Horowitz, 1954–1971
• Moshe Sanbar, 1971–1976
• Arnon Gafni, 1976–1981
• Dr. Moshe Mendelbaum, 1982–1986
• Prof. Michael Bruno, 1986–1991
• Prof. Jacob A. Frenkel, 1991–2000
• Dr. David Klein, 2000–2005
• Prof. Stanley Fischer, 2005–present

Decision making

The Bank of Israel is rather unusual when compared to other financial institutions in that the Governor alone decides whether to change rates or keep them on hold, rather than being voted upon by board members. Prior to this decision, discussions are held at two levels - first in a broad and then narrow forum.^{[citation needed]}

The broad forum sees the Governor, Deputy Governor, departmental directors and departmental economists come together, and the economists present current economic and financial conditions and data.^{[citation needed]}

The narrow forum consists only of the Governor, Deputy Governor and the departmental directors, and is far more discussion oriented. The directors present their opinions and recommendations, which the Governor questions and weighs before reaching his decision.

In March 2010, the Knesset approved a new Bank of Israel Law, which officially takes effect on June 1, 2010. The new law clearly defines the goals of the bank and gives the bank independence in determining its policy tools and the way of implementing them.

The law changes the framework in which major decisions are made in the Bank of Israel. Decisions regarding the rate of interest and monetary policy in general will be made by a Monetary Committee, while the managerial decisions will be approved by an Administrative Council. This brings the Bank of Israel more in line with the decision making procedures of other financial institutions.

Further reading

• Daniel Maman and Zeev Rosenhek. 2011. The Israeli Central Bank: Political Economy, Global Logics and Local Actors, Routledge.

See also

• New Israeli shekel
• Banking in Israel

Lists

• List of central banks

External links

• (Hebrew) (English) Official site: Bank of Israel
• The Bank of Israel lowers the interest rate for February 2007 by 25 basis points to 4.25 percent - Press release
• Exports Boost Economy in Israel - Research Performed by Bank of Israel