April 12, 1998

Additional liberalization measures which remove restrictions on transactions
with nonresidents will make the NIS more convertible and tradable in financial markets in Israel and abroad.

Nonresidents may carry out unrestricted future or forward transactions in NIS/foreign-currency and other derivatives. Banks in Israel may purchase NIS from banks abroad with foreign currency, without restriction. An Israeli resident may make permitted payments in NIS to a nonresident, with the presentation of the appropriate documents, but any NIS transaction with a nonresident must be reported to the bank.

The Bank of Israel today announced further relaxations in the directives of the Foreign Exchange Control, which will abolish restrictions on nonresidents’ transactions in Israel. This completes the implementation of all the specific steps which were announced in August 1997. The relaxations regarding nonresidents and transactions with them will come into effect on May 1, 1998.

The main changes are:

A nonresident is permitted to carry out via an authorized dealer bank, unrestricted, normal transactions in derivatives such as options, forwards, and NIS/foreign-currency swaps. Hitherto, there was a time limitation in effect, and a nonresident could not engage in such transactions if they were for periods of more than one month. This step, which follows the removal in January 1998 of restrictions on Israeli residents’ transactions in derivatives, completes the removal of all restrictions on transactions in the futures market.

The directive prohibiting banks from purchasing NIS from abroad with foreign currency is abolished. The abolition of the directive is intended to make the NIS more tradable and convertible in the world’s money markets.

Residents may make payments to nonresidents in NIS as well as in foreign currency in any permitted transaction. The Bank of Israel advises that when such NIS payments are made to a nonresident, the resident must report to the bank that the other party to the transaction is a nonresident. This requirement arises from the need to identify transactions between residents and nonresidents in order to maintain a system of balance-of-payment data relating to Israel’s economy, as well as to enable an efficient monetary policy to be conducted, taking account also of nonresidents’ local-currency activities.

Henceforth there are only two types of nonresidents’ deposits in banks in Israel: nonresidents’ foreign-currency deposits and nonresidents’ NIS deposits, and within the latter, indexed deposits and savings schemes are permitted. Hitherto, a number of foreign-currency and local-currency deposits were available to nonresidents, some of them normal deposits and others specifically for nonresidents, money in which could be converted to foreign currency and taken out of Israel. Henceforth, a nonresident may perform any activity in a nonresident local-currency deposit which is permitted in a nonresident foreign-currency deposit, such as extending loans to residents, paying for imports to Israel, or purchasing services from a resident.

An Israeli resident who employs a foreign worker in Israel for a period of less than 30 days, including hosting lecturers, artists, sportsmen, etc., may henceforth purchase foreign currency for the nonresident’s expenses and wages or fees without having to present the certificate and license previously required. Hitherto, a resident had to present such documents in order to pay the nonresident in foreign currency, complicating the procedure for paying such nonresidents.