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Bank of Israel
The Bank of Israel (Hebrew: בנק ישראל, Arabic: بنك إسرائيل) is the central bank of Israel. The bank's headquarters is located in Kiryat HaMemshala in Jerusalem with a branch office in Tel Aviv. The current governor is Amir Yaron.
The primary objective of the Bank of Israel is to maintain stability in prices and the financial system in Israel. It also administers and implements monetary policy in Israel, conducts foreign exchange operations, supervises and regulates the banking system, takes care of the foreign reserves and operations of the financial market infrastructure. The Bank of Israel has, under Article 41 and 44 of its Statute, the exclusive right to issue Israeli Shekel banknotes and coins.
When Israel gained independence in 1948, the power of note issuance was vested with the Anglo-Palestine Bank, which was refounded as Bank Leumi in 1950. This was done due to the urgency at the time to produce notes. Monetary policy and banking supervision remained controlled by the Ministry of Finance.
Since a central bank is considered a must in modern countries, in March 1951, a committee was founded called the "committee to establish a state bank". In the committee were Eliezer Kaplan, Levi Eshkol and others. The committee sent its secretary to the United States to study the way state banks function as well as advised ask the UN for expert advisors. The committee established the aim for the bank to be the stabilization of the currency, the keeping of high levels of production, employment and earnings.
The foreign experts advised to grant the bank of Israel a standing independent from the ministry of finance, in order to avoid political influences on decisions and the handing out of debt to different sectors. It was advised the bank would be managed by committee members representing the various sectors in the Israeli public. The monetary committee of the Knesset preferred that the bank be run by the governor alone who would be under governmental supervision, that way the bank could prove an effective way to guide the financial markets of the country. In the end it was decided to grant the central bank limited independence, but according to the law it was obligated to cover government expenditure when needed. In 2010, the law was changed and since the Bank of Israel has full independence in setting its monetary policy.
The Bank of Israel was founded on 24 August 1954, when the Knesset passed the Bank of Israel Law, 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 country's Foreign Exchange Reserves.
The bank began operating under the management of its first governor, David Horowitz. The department responsible for issuing banknotes was transferred to the Bank of Israel, which later became the currency department, and the unit for supervising banks from the Ministry of Finance, which also became a department in the bank. Over time, additional units and departments were established in the bank, including the monetary department, the foreign currency 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 supervising credit allocation and the lack of oversight over the banking system. Until the establishment of the bank, the bank supervision department was a small division within the Ministry of Finance, lacking the tools to oversee the complex banking system, which included dozens of banking institutions and cooperative credit societies scattered geographically throughout Israel. Through the establishment of a 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 cooperative societies were merged into larger banks. This trend was encouraged by both the Bank of Israel and the government, as it facilitated government and bank control over credit allocation.
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Bank of Israel
The Bank of Israel (Hebrew: בנק ישראל, Arabic: بنك إسرائيل) is the central bank of Israel. The bank's headquarters is located in Kiryat HaMemshala in Jerusalem with a branch office in Tel Aviv. The current governor is Amir Yaron.
The primary objective of the Bank of Israel is to maintain stability in prices and the financial system in Israel. It also administers and implements monetary policy in Israel, conducts foreign exchange operations, supervises and regulates the banking system, takes care of the foreign reserves and operations of the financial market infrastructure. The Bank of Israel has, under Article 41 and 44 of its Statute, the exclusive right to issue Israeli Shekel banknotes and coins.
When Israel gained independence in 1948, the power of note issuance was vested with the Anglo-Palestine Bank, which was refounded as Bank Leumi in 1950. This was done due to the urgency at the time to produce notes. Monetary policy and banking supervision remained controlled by the Ministry of Finance.
Since a central bank is considered a must in modern countries, in March 1951, a committee was founded called the "committee to establish a state bank". In the committee were Eliezer Kaplan, Levi Eshkol and others. The committee sent its secretary to the United States to study the way state banks function as well as advised ask the UN for expert advisors. The committee established the aim for the bank to be the stabilization of the currency, the keeping of high levels of production, employment and earnings.
The foreign experts advised to grant the bank of Israel a standing independent from the ministry of finance, in order to avoid political influences on decisions and the handing out of debt to different sectors. It was advised the bank would be managed by committee members representing the various sectors in the Israeli public. The monetary committee of the Knesset preferred that the bank be run by the governor alone who would be under governmental supervision, that way the bank could prove an effective way to guide the financial markets of the country. In the end it was decided to grant the central bank limited independence, but according to the law it was obligated to cover government expenditure when needed. In 2010, the law was changed and since the Bank of Israel has full independence in setting its monetary policy.
The Bank of Israel was founded on 24 August 1954, when the Knesset passed the Bank of Israel Law, 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 country's Foreign Exchange Reserves.
The bank began operating under the management of its first governor, David Horowitz. The department responsible for issuing banknotes was transferred to the Bank of Israel, which later became the currency department, and the unit for supervising banks from the Ministry of Finance, which also became a department in the bank. Over time, additional units and departments were established in the bank, including the monetary department, the foreign currency 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 supervising credit allocation and the lack of oversight over the banking system. Until the establishment of the bank, the bank supervision department was a small division within the Ministry of Finance, lacking the tools to oversee the complex banking system, which included dozens of banking institutions and cooperative credit societies scattered geographically throughout Israel. Through the establishment of a 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 cooperative societies were merged into larger banks. This trend was encouraged by both the Bank of Israel and the government, as it facilitated government and bank control over credit allocation.