Bank Of Israel (Hebrew ：בנק ישראל， Arabic ：بنك إسرائيل） Is The Central Bank Of Israel. The Bank Is Headquartered In Kiryat HaMemshala In Jerusalem And Has A Branch In Tel Aviv. The Current Governor Is Amir Yaron.
The Main Objective Of Bank Of Israel Is To Maintain The Stability Of Israel's Price And Financial System. It Also Manages And Implements Israel's Monetary Policy, Conducts Foreign Exchange Operations, Supervises And Supervises The Banking System, And Is Responsible For The Operational Infrastructure Of Foreign Exchange Reserves And Financial Marekts. According To Articles 41 And 44 Of Its Regulations, Bank Of Israel Has The Exclusive Right To Issue Israeli Shekel Banknotes And Coins.
History
Founding And Early Years
After Israel Gained Independence In 1948, The Power To Issue Banknotes Was Given To Anglo-Pakistani Bank, Which Was Renamed Leumi Bank In 1950. This Was Done Because Notes Needed To Be Made At That Time. Monetary Policy And Banking Supervision Remained Under The Control Of The Ministry Of Finance.
Since A Central Bank Was Considered A Necessity In The Modern State, A Committee Called "Committee For The Establishment Of A National Bank" Was Formed In March 1951. Members Of The Committee Included Eliezer Kaplan, Levi Eshkol, And Others. The Committee Sent Its Secretary To The United States To Study How State-owned Banks Operate And Recommended Seeking Expert Advisors From The United Nations. The Committee Determined That The Bank's Goal Is To Stabilize The Currency And Maintain A High Level Of Production, Employment And Income.
Foreign Experts Recommended Granting The Bank Of Israel Independence From The Ministry Of Finance To Avoid Political Influence On Decision-making And The Release Of Debts To Different Sectors. It Is Reported That The Bank Will Be Run By Committee Members Representing Various Sectors Of The Israeli Public. The Knesset's Monetary Committee Prefers The Bank To Be Run Solely By The Governor, Who Will Be Supervised By The Government So That The Bank Can Prove To Be An Effective Way To Direct The Country's Financial Marekt. The Final Decision Granted The Central Bank Limited Independence, But It Is Obligated By Law To Pay Government Expenditures When Needed. In 2010, The Law Was Changed Because The Bank Of Israel Has Complete Independence In Setting Monetary Policy.
The Bank Of Israel Was Established On August 24, 1954, When The Knesset Passed The Bank Of Israel Law, Handing Over The Monetary Issuance And Regulatory Functions Of The Ministry Of Finance To The Newly Created Bank. It Was Not Until 1978 That The Bank Gained Control Over Foreign Exchange Conversions. The Bank Became Fully Independent In 1985, And Since 1992, The Bank Has Managed Its Monetary Policy To Meet The Inflation Targets Set By The Israeli Government - Today's Annual Inflation Rate Is Between 1% And 3%, Which Is Considered Price Stable. In Addition, The Bank Also Manages The Country's Foreign Exchange Reserves.
The Bank Began Operations Under Its First Governor, David Horowitz. The Department Responsible For Issuing Banknotes Was Transferred To The Bank Of Israel, Which Later Became The Monetary Department, While The Unit Supervising The Bank Was Transferred From The Ministry Of Finance, Which Also Became A Department Of The Bank. Over Time, The Bank Established More Units And Departments, Including The Monetary Department, The Foreign Exchange Supervision Department (transferred To The Bank In 1978), The Foreign Currency Department, And The Research Department.
One Of The Factors That Led To The Accelerated Decision To Establish A Central Bank Was The Government's Difficulty In Overseeing Credit Allocation And The Lack Of Oversight Of The Banking System. Before The Establishment Of The Bank, The Banking Supervision Department Was A Small Department Of The Ministry Of Finance And Lacked The Tools To Oversee The Complex Banking System, Which Included Dozens Of Banking Institutions And Cooperative Credit Unions Distributed Throughout Israel. By Establishing The Central Bank, The Government Hoped To Improve Its Control Over The Banking System And Credit Allocation. After The Establishment Of The Bank Of Israel, The Banking System Underwent A Process Of Consolidation, During Which Cooperatives Merged Into Larger Banks. This Trend Was Encouraged By The Banks And The Government Of Israel, As It Promoted The Control Of The Government And Banks Over Credit Allocation.
The Establishment Of The Bank Holds Promise For Reducing Government Intervention In The Economy And Reducing Concentration, Although In Practice, The Result Has Been The Opposite - Increased Government Involvement. Some Anticipated This Development And Tried Unsuccessfully To Delay The Establishment Of The Bank Of Israel.
1960s And 1970s
David Horowitz Served As Governor Of The Bank For 17 Years. His Early Tenure As Governor Was Characterized By Relatively Stable And Rapid Economic Growth, With No Major Inflation Until The Early 1960s. In 1962, As Rising Living Standards And Consumption Levels Led To Inflationary Pressures (annual Inflation Reached 9%), Rising Wages, And The Danger Of A Balance Of Payments Deficit, In 1962 Finance Minister Levi Eshkol Devalued The Pound Sharply, From 1.80 To 3 To The Dollar. The Devaluation Did Not Solve The Exposed Problems. After The Devaluation And Budgetary Difficulties, The Ministry Of Finance Turned To A Tight Fiscal Policy.
In 1966, The Economy Experienced A Severe Recession, And The Bank Of Israel Was Forced To Adjust Its Policies For The First Time To Accommodate The Situation. Among Other Things, Three Private Banks Collapsed: Bank Alran, Bank Poalei Agudat Israel, And Bank Credit, Which Intervened For The First Time, Using Its Powers Under Article 44 Of The Israeli Banking Law To Protect Depositors.
In 1971, Moshe Zanbar Replaced Horowitz As Governor Of The Central Bank. The Bank Of Israel Faced Unprecedented Circumstances, Such As Rampant Inflation (14% In 1972) And Increased Public Spending Following The Six-Day War. The Yom Kippur War And The Ensuing Energy Crisis Exacerbated Economic Problems, Inflation, Balance Of Payments Deficits, And The Rate Of Devaluation. In July 1974, The Bank Of Israel Intervened In The Israel-British Bank And Fired The Bank's Management After Discovering Criminal Irregularities In The Bank's Management.
In 1976, Arnon Gafni Became Governor.
In The 1980s, The Crisis, The Introduction Of The New Israeli Shekel
In 1982, Moshe Mendelbaum Was Appointed Governor. As Governor, He Had To Deal With A Dire Economic Situation That Plunged The Economy Into Due To Rampant Inflation. At The Same Time, He And The Head Of The Bank Found Themselves Caught In One Of The Most Difficult Economic Crises In The History Of The State Of Israel - The Bank Stock Crisis Of 1983. In The Early Eighties, Inflation Got Out Of Control And Reached An Unprecedented Peak In The Country's History. Rising Prices Were The Norm. In 1984, The Inflation Rate Peaked At 450%.
In 1984, A Government Of National Unity Was Formed To Deal With Rampant Inflation. In 1985, A Comprehensive New Plan, The Economic Stabilization Plan, Was Adopted, Developed By Finance Officials With The Assistance Of Prominent Economists From Academia, Led By Professor Michael Bruno, And Accompanied By Prominent Economists From Abroad, Including Professor Stanley Fischer. A Major Amendment Was Implemented To Israel's Banking Law, Prohibiting The Government From Borrowing From Banks To Cover Budget Deficits, And The Shekel Was Replaced By A New Shekel, Removing The Three Zeros. The Stabilization Plan Considers The Components Of A Comprehensive Recovery Plan, The Essence Of Which Includes: Significant Cuts In The Government Budget (mainly Through Significant Reductions In Subsidies And Other Government Expenditures); A Decline In Real Wages (aimed At Reducing Local Demand, Improving Export Competitiveness, And Preventing Severe Unemployment Growth); High Interest Rates And The Stabilization Of The Exchange Rate At New Levels For As Long As Possible; And An Administrative Freeze On Prices For A Limited Period Of Time. As The Implementation Of The Plan Was Fully Supported By The Government And Inflation Fell To Single Digits (which Was Greatly Helped By Legal Amendments), The Bank's Position Was Significantly Strengthened.
In 1986, Professor Michael Bruno, One Of The Architects Of The Stabilization Plan, Was Appointed President Of The Bank. The Bank Of Israel's Position Was Further Strengthened After The Publication Of The Findings Of The Basel Committee In 1986 And The Expansion Of The Bank Of Israel's Powers As A Banking Regulator. In 1978, Foreign Exchange Supervision Was Transferred From The Ministry Of Finance To The Bank Of Israel. Subsequently, After A Long Process Of Liberalization Of The Foreign Exchange Market, Foreign Exchange Supervision Was Finally Abolished In 2003. The Ministry Of Foreign Exchange Supervision Was Renamed The "Department Of Foreign Currency Market Operations" And Was Responsible For Monitoring And Studying The Activities Of The Economy Towards Foreign Countries And The Foreign Exchange Market.
The Bank's Position Was Strengthened After The Economic Stabilization Plan Of 1985, Mainly Due To Amendments To The Israeli Banking Law, Which Prohibited The Government From Borrowing From Banks To Cover Budget Deficits.
21st Century
David Klein Was Appointed As The Seventh Governor In 2000 And Continued The Path Of The Previous Governor: Implementing Monetary Reforms, Implementing A Hard-line Monetary Policy, Beginning Efforts To Transfer Authority Over Wage Agreements To The Ministry Of Finance, And Opening Up The Foreign Exchange Market. During Klein's Tenure, Tensions In The Area Of Industrial Relations Increased. The Conflict Between The Bank Of Israel And The Ministry Of Finance Also Reached Its Peak Over Wage Agreements Implemented By The Bank Of Israel. The Background To The Controversy Was The Basic Budget Law, Enacted In 1985 In Conjunction With The Stabilization Plan, Which Stipulated That Public Institutions, Including Banks, Would Be Bound By The Law. The Ministry Of Finance Claimed That The Bank Of Israel's Wage Agreements Deviated From The Norms Of Public Services. In 2005, Stanley Fischer Was Appointed As The Eighth Governor. Fischer Announced His Intention To Introduce A New Law For The Bank Of Israel To Replace The 1954 Law, Regulate Labor Relations With The Ministry Of Finance Regarding Bank Wage Agreements, And Implement Structural Reforms At The Bank. With The Onset Of The 2008 Economic Crisis, Fischer Pursued A Successful And Internationally Recognized Policy: He Quickly Adjusted Interest Rates (the World's First To Lower And Raise Interest Rates), Acquired Foreign Exchange Reserves, And Purchased Government Bonds To Lower Interest Rates For A Long Time. In 2008, The Bank Underwent Organizational Changes, Including The Closure Of The Foreign Exchange Business Department (which Formed The Basis Of The Information And Statistics Department), The Currency Department (part Of Which Was Merged With The Foreign Exchange Department To Form The Market Department, And Another Part With The Research Department To Form The Research Department), And The National Loan Administration. The Bank's Department Was Restructured Into Multiple Departments.
In 2010, According To IMD's World Competitiveness Yearbook, The Bank Of Israel Ranked First Among Central Banks For Its Efficient Operations.
In March 2010, The Knesset Approved A New Bank Of Israel Law, Which Came Into Force On June 1, 2010. The New Law Defines The Objectives Of Banks And Gives Them Independence In Determining Their Policy Tools And How They Implement Them. The Law Changes The Framework In Which The Bank Of Israel Makes Major Decisions. Generally, Decisions On Interest Rates And Monetary Policy Are Made By The Monetary Board, While Management Decisions Are Approved By The Supervisory Board. This Brings The Bank Of Israel More In Line With The Decision-making Process Of Other Financial Institution Groups.
In 2013, Dr. Karnit Flug Was Appointed Governor Of The Bank. She Continues The Policies Of Her Predecessors, Deepening Currency Control And Integrating Israel Into The Global Economy.
In 2018, Professor Amir Yaron Was Appointed Governor Of The Bank. During His Tenure, Bank Of Israel Approved The Establishment Of Two New Banks In Israel: Bank One Zero And Bank Ash Israel.
Architecture
The Current Headquarters In Jerusalem Was Designed By The Architectural Firm Of Arieh Sharon And His Son Eldar Sharon. They Won The First Prize For The Project In 1966 And Worked On The Design Until 1974. [17] The Building Was Completed In 1981. The Design Resembles An Inverted Pyramid And Was Inspired By Boston City Hall. The Building Was Overhauled And Renovated Between 2015 And 2018.
Governor
- David Horowitz, 1954-1971
- Moses Sambal, 1971-1976
- Arnon Gaffney, 1976-1981
- Moses Mendelbaum, 1982-1986
- Michael Bruno, 1986-1991
- Jacob Frenkel, 1991-2000
- David Klein, 2000-2005
- Stanley Fisher, 2005-2013
- Kanit Fruger, 2013-2018
- Nadine Baudot-Trajtenberg, Served As Acting Governor From November 14 To December 24, 2018. [ 18]
- Amir Yaron, 2018 Present
