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The Bank of Israel publishes its 2013 work plan and budget

 

 

 

A decision was reached to cut 19.2 percent from the operational investments budget and 5.3 percent from the total Bank of Israel budget excluding currency issue, reserves and income

 

 
The Bank of Israel today is publicizing the main points of its work plan and administrative budget for 2013.
 

 

The Supervisory Council[1] discussed the Bank's annual work plan, approved the Bank's annual administrative budget, and submitted it in the Knesset Finance Committee, as required by the Bank of Israel Law, 5770-2010.

 

 
Today, the Knesset Finance Committee discussed the Bank's annual budget, presented below, which encompasses the administrative activities of the Bank and is constructed in order to allow the Bank to carry out its functions and achieve its primary targets for the year.
 
 
The Bank’s main targets for the coming years as determined by management are shown below:
 
  •   Continued implementation of the new Bank of Israel Law
  •     Development of a macroprudential framework to strengthen the economy’s financial stability
  •   Promotion of reforms in the banking system 
  •   Strengthening of the role of the Governor as advisor to the government on economic issues
  •   Development of the Bank’s human capital, and recruitment of and keeping staff of the highest quality
  •   Continued upgrading of the information and statistics systems
  •    Development of state-of-the-art technological infrastructures
  •     The issue of a new currency series
  •     Strengthening of the Bank of Israel's emergency preparedness
 
A.           The Bank's Main Projects in 2013
The following are several major projects planned for 2013:
 
The issue of a new currency series
During the second half of 2013, the process of issuing a new series of banknotes to the public will begin. The new series of banknotes will integrate innovative security features, among the most advanced in the world, in order to make counterfeiting more difficult. It is generally accepted practice in advanced countries to replace the series of banknotes in circulation once every 10–15 years
 
Promotion of Information Technology Infrastructure
As part of the formulation and operation of the Bank's computerization strategy, modern information systems have been designed to support the Bank's goals. The Bank's new Internet site was launched in September 2012, and will continue to be upgraded on a constant basis in the coming years.
 
Bank of Israel central data warehouse (DWH)
This project is the construction of a new central infrastructure for managing economic data at the Bank of Israel. The central data warehouse will contain most of the economic information in the Bank, and it will service Bank employees as well as external users. So far, data on specific areas of financial activity in the economy have been entered. This project is expected to take another few years, during which most of the Bank of Israel's data on the financial system will be incorporated into the warehouse, and advanced tools will be integrated for the input and improvement of the data and their retrieval and analysis.
 
Replacement of the Public Enquiries System
Due to increased public awareness in the area of banking, technological developments over the past few years, and the significant increase in the number of public enquiries to the Bank of Israel, it has become necessary to improve the Banking Supervision Department's ability to provide a rapid and efficient response to public enquiries. The Banking Supervision Department has therefore launched a project to replace the computer system serving the Public Enquiries Unit. The project is expected to be completed in the second half of 2013.
 
The renovation of the Bank's premises in Jerusalem
The planning of the renovation of the Bank’s premises in Jerusalem will be completed in 2013. It is also the Bank's intention to complete the preparations and tenders required for contracting with the contractors who will do the work.
The construction of the Bank of Israel building began in the 1960s, with the installation of the main infrastructure, which has since become antiquated, making urgent the need to replace it. The building does not meet various safety standards or accessibility standards; there are critical safety hazards; the electrical infrastructure is not suitable for absorbing critical systems; other important systems such as plumbing and air conditioning are sub-standard; the building does not meet fire safety standards requirements, and more. In recent years, the Bank has carried out in-depth economic studies to assess the most preferred way of handling these problems. Following a long and thorough assessment process, a comprehensive plan was drawn up to renovate the existing building. As part of the renovation, the building's foundations will be strengthened to bring it as close as possible to meeting the existing earthquake resistance standards, the electrical, plumbing, ventilation and fire fighting infrastructures will be replaced, and more. The 2013 budget contains a permitted commitment in respect of this item that includes the direct costs of the renovation, totaling NIS 176.9 million. This cost will be spread out over 4 years.
 
B.           The Bank's Budget
The Bank of Israel's budget allocates funds for the administrative activities of the Bank necessary for fulfilling of its functions and achieving its goals. 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 bodies that deal with the management of the Bank and the provision of services and support);
2.    Carrying out the Bank’s functions (the expenditure budgets of the departments that perform the Bank’s functions);
3.    Representative office abroad;
4.    Pensions;
5.    Investments;
6.    Income;
7.    Reserve;
8.    Currency issue.
 
As part of structuring the budget for 2013, a decision was reached to cut 19.2 percent from the operational investments budget and 5.3 percent from the total Bank of Israel budget excluding currency issue, reserves and income.
 
The budget of the Bank of Israel for 2013, excluding currency issue, totals NIS 731.1 million, compared with NIS 740 million in 2012, a nominal cut of 1.2 percent. The overall budget of the Bank of Israel for 2013 totals NIS 881.8 million, compared with NIS 798.2 million in 2012. The increase in the budget is due to an increase of NIS 92.5 million in the currency issue budget. The share of currency issue expenditures in the total Bank of Israel budget for 2013 is 17 percent (compared with 7 percent in the 2012 budget).  This share is significantly impacted by the issue of the new series of banknotes into circulation.
 
 
The main changes in the Bank of Israel budget for 2013 are:
 
Labor costs: A decrease of NIS 5.4 million (-1.7 percent), deriving from a decrease of 48 percent in indirect labor costs, and an increase of 5.1 percent in direct labor costs.
 
Pensions: A decrease of NIS 20 million (-7.7 percent) stems from a forecast for a smaller number of retirees compared to 2012. There was an increase in this item in 2012 due to the coming into effect of a change in wage agreements in August.
 
Investments: In the Bank's 2013 budget, there is a decrease of NIS 15.7 million (-19.2 percent) in the investments budget compared to the 2012 budget.
 
Budget in future years: 39 percent of the budget for permitted commitments for coming years stems from the permitted commitment for the issue of the new series of banknotes. The budget for printing money is expected to increase further, from NIS 150.7 million in 2013 to NIS 221.8 million in 2014. An additional 30 percent of the permitted commitments budget for the coming years stems from the planned renovation of the Bank's premises in Jerusalem. The renovation budget will be spread out over 4 years.
 
 
The administrative activities budget does not include income and expenses stemming from the sale of monetary instruments, the provision of credit to banking corporations and other financial institutions, activities related to managing liquidity in the economy, and foreign exchange reserves investments. Income and expenses from these types of activities are reflected in the Bank of Israel's financial statements.
 
 
 

Table 1: The Bank of Israel’s Budget for 2013
(NIS thousand)
 
 
2013
 
 
 
 
 
 
Expenditure budget
 
Transfers from 2012
Permitted commitments for coming years
 
 
Personnel ceiling
 
 
 
Original 2012 budget
 
 
 
Actual expenditure 2011
 
Bank of Israel
881,829
34,754
592,615
730
798,165
646,217
 
Total excluding currency issue
========
731,095
=====
34,754
====
361,447
======
730
===
739,972
=====
612,017
======
01
Management and Central Services
194,139
 
8,960
45,858
310
207,914
192,755
02
Performance of Bank’s functions
180,862
816
59,815
418
169,498
156,116
03
Representative office abroad
3,763
 
2,346
2
3,897
2,758
04
Pensions
238,057
 
55
 
257,813
214,494
05
Investments
66,000
19,978
253,373[2]
 
81,732
46,406
06
Income
(397)
 
 
 
(452)
(511)
07
Reserve
48,671
5,000
 
 
19,571
 
08
Currency issue
150,734
 
231,168
 
58,193
34,199
 
 
 
 
 
 

[1] This is the second year in which the Bank's budget is approved by the Supervisory Council, composed of members from among the public—Mr. Dan Propper, Chairman; Mr. Ytzhak Edelman, CPA; Mr. Uri Galili; Prof. Nina Zaltzman; Mrs. Maxine Fassberg, and members from the Bank—Prof. Stanley Fischer and Dr. Karnit Flug.
 
[2] This budget includes a total of NIS 176,900,000 in respect of the direct costs of renovating the Bank's premises in Jerusalem, which will be spread out over four years.