BANK OF ISRAEL
Office of the Spokesperson and Economic Information
December 16, 2014
Press Release
The Bank of Israel publishes its 2015 work plan and budget
The Bank formulated its targets for the next three years, and they will guide its
activity during that period.
The Bank of Israel budget for 2015 lower than the budget for 2014 by 5 percent
The Bank of Israel today is publishing the main points of its work plan and
administrative budget for 2015.
The Bank of Israel’s Supervisory Council 1 discussed the Bank's annual work plan,
approved the Bank's annual budget for administrative activities, and submitted the
budget to the Knesset Finance Committee, as required by the Bank of Israel Law,
5770–2010. The budget was constructed with the goal of allowing the Bank to carry
out its functions and to achieve its primary targets for the year.
The Bank of Israel recently completed a strategic process of defining the Bank’s
targets for the years 2015–17. These targets serve as the basis of the work plan and
budget for 2015, and were formulated while taking into account the changes and
challenges expected in the Israeli and global economies during this period.
Following are the main targets set by the Bank’s management for the coming years:
1. Implementing monetary policy and managing the foreign exchange reserves in
accordance with the environment
The challenge inherent in managing monetary policy in a low interest rate environment
requires the Bank of Israel to make informed use of monetary tools that are appropriate
to this interest rate environment. At the same time, expectations for a global economic
1
The Supervisory Council is the entity charged with supervising the administrative activities of the
Bank of Israel. The Supervisory Council consists mostly of members from among the public. The
Supervisory Council members from among the public are Acting Chairman Mr. Uri Galili; Mr. Ytzhak
Edelman, CPA; and Prof. Nina Zaltzman. The internal members of the Council are Governor of the
Bank of Israel Dr. Karnit Flug and Deputy Governor of the Bank of Israel Dr. Nadine BaudotTrajtenberg.
The Bank of Israel publishes its 2015 work plan and budget
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recovery require the Bank to prepare for a return to normal for monetary policy in the
slightly longer term. To that end, the Bank of Israel will continue to align the
macroeconomic projection abilities to conditions created after the crisis and to take
into account considerations related to financial stability when formulating monetary
policy.
In 2015, the Bank will continue to examine the possibility of investing the foreign
exchange reserves in new countries and instruments, in accordance with the risk profile
defined by the Monetary Committee and with the global and domestic macroeconomic
environments.
2. Strengthening the economy’s resilience to crises
An economy’s financial and economic resilience is reflected in, among other things, its
ability to deal with crises and to get through them in an optimal manner. In order to
bolster the financial system’s readiness to deal with various crisis events, the Bank will
act through various routes—formulating and implementing steps to reduce
macroprudential risk in the economy; developing and implementing bank resolution
mechanisms, and promoting business continuity capabilities of the banking system and
of the payment and settlement systems, including in the cyber area.
3. Promoting effective and reliable systems and means of payment
The Bank of Israel is responsible for, among other things, the regular supply of cash to
the economy, and ensuring the effectiveness of the payment systems and means of
payment that serve as cash substitutes, such as checks, the Zahav (RTGS) system, the
Shva and Masav (automated clearing house) systems, various payment cards, and other
advanced means of payment. The Bank of Israel works to ensure the effectiveness and
reliability of the various means of payment in the economy. In the coming years, the
Bank of Israel will move forward with issuing the next denominations in the new
series of banknotes. In addition, the Bank will act to strengthen the payment and
settlement systems oversight infrastructure and to increase the use of electronic
systems and means of payment.
4. Supporting sustainable and inclusive growth
Expected demographic developments, and with them the exhausting of processes that
accelerated growth in previous decades, indicate that the growth in GDP per capita
could decline markedly as early as in the remainder of this decade. In order to assist in
designing a policy path and processes that will contribute to increasing the potential
growth of the economy, and alongside that reduce poverty, the Bank of Israel will
focus its research in coming years on areas with the potential to contribute to
increasing growth and distributing its benefits to various segments of the population.
5. Maintaining the public’s confidence in the banking system
In view of the concentrated structure of the banking system in Israel and in view of the
information and power gaps between banks and their customers, it is important to set
rules and take actions to ensure the proper conduct of the system and to empower bank
customers. In order to maintain the public’s trust in the banking system, the Bank of
The Bank of Israel publishes its 2015 work plan and budget
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Israel will continue to act to encourage competition in the banking system, to promote
fairness by the banks toward their customers, and to advance financial education for
the public.
6. Promote information and research supporting policy decisions
The Bank of Israel will continue to upgrade economic-financial statistics and promote
information that supports policy decisions by developing tools for statistical analysis
and forecasting and by advancing empirical research and analytical tools that integrate
various sectors.
7. Maintaining banking system and payment and settlement system stability
By law, one of the Bank of Israel’s three objectives is to support the stability and
orderly activity of the financial system. In the years ahead, the bank will continue to
move forward with prudential regulation which is appropriate for the Israeli economy
and consistent with international standards (setting directives for ensuring proper
conduct of supervised entities), emphasis will be placed on effective supervisory and
enforcement processes in order to ensure compliance with the directives and
regulation, and the Bank of Israel will act to increase collaboration and coordination
with regulators in Israel and abroad.
8. Development of human capital
In order to maintain the high level of professionalism that has characterized the Bank
of Israel over the years, the Bank will emphasize processes that ensure the hiring and
retaining of a quality workforce with a range of talents, and the formulation and
implementation of new tools to cultivate human capital.
9. Bolstering the organizational preparedness for achieving the Bank’s targets
The Bank of Israel acts to bolster its operational and organizational preparedness in
order to increase its efficiency and to lead to an optimal allocation of resources over
time. Organizational preparedness includes integrating advanced technological systems
in all areas of the Bank’s activities, promoting a risk management system and
improving controls at the Bank, upgrading the Bank’s physical infrastructures,
improving information and knowledge management, and advancing the Bank’s
business continuity preparedness (including the cyber area).
The Bank’s Budget
The Bank of Israel's budget allocates funds for the administrative activities of the
Bank, necessary for performing its functions and achieving its targets.
In accordance with the Bank of Israel Law, the Bank of Israel's budget is divided into
several areas of activity:
1. Management and Central Services (the expenditure budgets of the entities that deal
with the management of the Bank and the provision of services and support);
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2. Performance of the Bank’s functions (the expenditure budgets of the departments
that carry out the Bank’s functions);
3. Representative office abroad;
4. Pensions;
5. Investments;
6. Income;
7. Reserve;
8. Currency issue.
9. Operation of the Citizens of Israel Fund for natural gas profits
The 2015 budget presents, for the first time, a new area of activity— Operation of the
Citizens of Israel Fund for natural gas profits—in light of the completion of legislation
related to establishing the Fund for the Administration of State Revenues from the
Petroleum Profits Levy and the need for preparation by the Bank ahead of its
operation, under the law.2
The overall budget of the Bank of Israel for 2015 is NIS 894.3 million, a nominal
decline of 4.8 percent compared with the budget for 2014 (NIS 939.3 million).
Following are the main changes in the Bank of Israel budget for 2015:
Reserve: A decline of NIS 73.4 million (-74.7 percent), deriving mainly from the
reduction of budget reserves earmarked for an agreement, which was signed in January
2014, to index pensions to the Consumer Price Index. The Bank’s budget for 2015
includes budget reserves that were earmarked for agreements and arrangements that
have not yet been approved by the Supervisory Council and will only be released after
their actual approval.
Pensions: An increase of NIS 35.5 million (+13.7 percent), stemming primarily from
the additional payment planned for 2015 in respect of the agreement signed in January
2014, based on which pension allowances will be indexed to the Consumer Price Index
instead of the average wage, similar to an agreement signed previously by the State.
The cost in 2015 of the agreement is NIS 26.6 million.
Investments: A decrease of NIS 3.4 million (-3.9 percent) deriving from a decision by
Bank of Israel management to avoid initiating large new projects that are not critical,
in order to concentrate on existing projects, particularly the area of physical
infrastructure.
Currency issue: A decrease of NIS 12.8 million (-14.3 percent) deriving from the
completion of the issue of the first denomination in the series during 2014.
Budget for operation of the Citizens of Israel Fund for natural gas profits:
According to the law, it is the Bank of Israel’s responsibility to operate the Fund for
2
The Citizens of Israel Fund Law, 5774-2014.
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the Administration of State Revenues from the Gas and Petroleum Profits Levy. The
Fund will commence operations in the coming years. In order to prepare in a timely
manner for the setting up of the required operational system, a designated budget—
NIS 0.4 million in 2015 and NIS 0.9 million in 2016—was set aside for that item, for
the first time, in a new area of activity.
Budget in future years: 42.8 percent of the budget for permitted commitments for
coming years is intended for future commitments in investment by the Bank, primarily
the renewal of the infrastructures and the planned renovation of the Bank's premises in
Jerusalem, and for setting up a technology and emergency center. An additional 38.8
percent of the budget for permitted commitments for coming years derives from the
permitted commitments in respect of the issue of the new series of banknotes, and they
are intended for commitments related to issuing the following denominations in the
series.
The administrative activities budget does not include income and expenses stemming
from the implementation of monetary tools, the provision of credit to banking
corporations and other financial institutions, activities related to managing liquidity in
the economy, and foreign exchange reserves investments. Such income and expenses
are reflected in the Bank of Israel's financial statements.
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Table 1: The Bank of Israel’s Budget for 2015
(financial data in NIS thousand)
2015
budget
894,309
817,797
Transfers
from
2014
34,221
34,221
Permitted
commitments
for coming
years
698,949
427,525
Personnel
ceiling
770
770
=====
=====
=====
===
Management
and Central
Services
Performance of
Bank’s
functions
Representative
office abroad
Pensions
Investments
Income
Reserve
Currency issue
223,256
2,460
62,416
321
212,320
175,891
193,305
780
42,147
447
189,775
164,320
819
2
3,284
2,632
226,631
76,512
271,423
259,966
87,209
(780)
98,245
89,306
Operation of the
Citizens of Israel
Fund for natural
gas profits
434
868
Bank of Israel
Total
excluding
currency issue
Original
2014
budget
939,325
850,019
Actual
expenditure
2013
767,917
624,563
=====
=====
========
01
02
03
04
05
06
07
08
09
3,423
295,502
879
21,836
83,831
30,102
299,440
)6,815(
24,861
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55,594
)505(
143,354