Regulating the economy's payment and settlement systems

Payment and settlement systems are vital parts of the economic and financial infrastructures of modern economies, and their efficient functioning contributes to economic development and financial stability. Section 4(5) of the Law states that one of the Bank's functions is "Regulating the economy's payment and settlement systems so as to ensure their efficiency and stability".

The Bank of Israel acts in various ways to promote the security, reliability, and efficiency of payment and settlement systems and to mitigate settlement risks. These actions include regulation, assessment, and auditing of the controlled payment systems.  They also include setting out supervisory principles, gathering information to serve as the basis for decisions regarding the declaration of controlled systems, and participating in international fora dealing with payment systems oversight.

In this context, the Bank carried out a comprehensive reform of Israel's payment and settlement systems in recent years in order to meet international standards set forth by the Bank for International Settlements (BIS).  

Israel's payment systems include technological systems that engage in "switching", clearance, and settlement activity, as well as general systems (schemas) that regulate the means of payment.

Israel's essential payment systems include a Real-Time Gross Settlement (RTGS) system, known in Israel as ZAHAV (a Hebrew acronym for "real-time credits and transfers" and a metonym denoting "gold"). The system, inaugurated in July 2007, is intended for the final transfer of large amounts in real time.  The Paper-Based (Checks) Clearinghouse is another essential system managed by the Bank of Israel. It is intended for the transfer of paper-based messages (checks and various credits and debits). 

These settlement systems are managed by the Bank of Israel's Payment and Settlement Systems Department.  In this framework, the Bank of Israel is mainly responsible for the following actions:

• On-going monitoring of activity in the systems and of their users in order to identify failures in advance;
• Dealing with operational, technical, or business failures of a system or of one of the settlement participants;
• Providing support for participants (commercial banks, the Postal Bank, and other clearinghouses);
• Monitoring and control of shekel settlements by CLS in the ZAHAV system.

Controlled systems:

Controlled systems are payment systems that, in the Governor's opinion, are essential for the entire payment system in the economy, and where there is concern that the system's improper, inefficient, or unreliable operation may impair the payments array in the economy.

The controlled payment systems currently operating in Israel are:

• The ZAHAV (RTGS) system operated by the Bank of Israel.
• The CLS system operated by the CLS Bank.
• The "Credits, Debits, and Transfers" system operated by MASAV (Banking Settlement Center).
• The "Payment Card Services" system operated by SHVA (Automatic Bank Services).
• The ATM system operated by SHVA (Automatic Bank Services).

Formulating the payment array's vision and strategy

The Bank of Israel is tasked with designing the long-term vision and strategy for the payments array.  This includes the creation and establishment of a practical basis for cooperation with internal and external partners, the definition and mapping of the needs and trends of payment system participants and of the general public, analyzing scenarios for various processes and examining payment system trends, and research to support the advancement of payment system policy.