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1.    The main targets in this year’s work plan deal with advancing reforms in the financial system, adjusting risk management of the foreign exchange reserves in view of the growth in the reserves portfolio, and developing a framework for strengthening the financial stability of the economy.

2.    The Bank of Israel’s total budget for 2014 is NIS 939.3 million, of which NIS 89.3 million is earmarked for currency issue.

3.    The reserve budget for 2014 is NIS 98.2 million, and includes a total of NIS 64.8 million in respect of an agreement that has not yet been signed to index pensions to the Consumer Price Index.

4.    Excluding the “reserve” area of activity, the Bank’s budget for 2014 totals NIS 841.1 million, representing nominal growth of 1 percent, which is lower than the inflation projection set in the State budget.
Mr. Dan Propper, Chairman of the Bank of Israel Supervisory Council, said, “The Supervisory Council believes that the Bank of Israel budget for 2014 will enable the Bank to continue to fulfill its functions, which are vital to the Israeli economy, and to maintain the capabilities required of it, through responsible and calculated budget management.  The work plan reflects the complex challenges faced by the Bank in the near future, from both the policy side and administrative standpoints, and lays the groundwork for dealing with these challenges.”

The Bank of Israel today is publishing the main provisions of its work plan and administrative budget for 2014.

The Supervisory Council[1] discussed the Bank's annual work plan and published its main points, approved the Bank's annual budget for administrative activities, 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 coming years.

A.   Main Targets

The Bank’s main targets for the coming years as determined by management are shown below:

·         Promotion of reforms in the financial system (including the banking system) and the capital market—The Bank will act to implement reforms in order to lead to enhancing the sophistication of the market and improving the manner in which financial and private institutions manage their risks.  Accordingly, the Bank—together with the Ministry of Finance and other regulators—will create conditions for increasing competitiveness in the domestic financial system, while maintaining its stability.  In addition, the Bank continues to improve the efficiency and stability of the payment and settlement systems, and for this purpose is establishing the oversight of these systems.

Expanding the foreign exchange reserves market risk management and adjusting it to the risk profile set by the Monetary Committee—In view of the increase in the foreign exchange reserves, the Monetary Committee adjusted the risk profile for managing foreign exchange reserves as part of the guidelines.  The risk profile reflects the desired balance between risk and return, in line with the goals of holding the reserves.

Development of a macroprudential framework for strengthening the economy’s financial stability—Macroprudential policy is intended to strengthen the financial system’s capability to withstand possible shocks.  This policy includes studying the potential threats to financial stability, identifying them beforehand and taking measures to reduce risk.  As part of this framework, the Monetary Committee holds periodic discussions on the state of financial stability, while using stress tests.  In addition, the Bank, in conjunction with the Ministry of Finance and the Israel Securities Authority, is promoting the establishment of a financial stability committee that will include representatives of the Ministry of Finance, the Bank of Israel and other regulators.

The issue of a new currency series

Advancing measures to ensure business continuity of the financial system and of the Bank of Israel

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 entities that deal with the management of the Bank and the provision of services and support);

Performance of the Bank’s functions (the expenditure budgets of the departments that carry out the Bank’s functions);

Representative office abroad;





Currency issue.

The budget of the Bank of Israel for 2014 totals NIS 939.3 million, compared with NIS 881.8 million in 2013, a nominal increase of 6.5 percent percent.

The Bank of Israel budget includes budget reserves earmarked for agreements that have not yet been approved by the Supervisory Council.  Excluding these reserves, the Bank’s budget is significantly lower, standing at NIS 841.1 million, compared with NIS 833.2 million in 2013, representing growth of 1 percent, which is lower than the inflation rate projected in the 2014 State budget (2 percent).

In putting together the budget for 2014, a cut of 4.5 percent was made in the investment budget.  The cut was achieved by cutting operating investments by 40 percent (NIS 25.6 million) while adding an investment of NIS 25.2 million in the Bank’s physical infrastructure, and adopting a long-term view.

The main changes in the Bank of Israel budget for 2014 are:

Reserve: An increase of NIS 49.6 million (+101.9 percent), deriving mainly from budget reserves earmarked for an agreement to index pensions to the Consumer Price Index, which is currently in advanced stages of negotiations and has not yet been signed (in line with an agreement already signed with State employees). The cost of the agreement is estimated at NIS 143.8 million, spread over 4 years.

Pensions: An increase of NIS 21.9 million (+9.2 percent), stemming from expectations of growth in the number of retiring workers and retirees compared with 2013.

Investments: A decrease of NIS 3 million (-4.5 percent) deriving from a reduction in current investments and a decision not to initiate new projects unless they are essential, in order to concentrate on existing projects, particularly the area of physical infrastructure.

Budget in future years: 27.4 percent of the budget for permitted commitments for coming years stems from the permitted commitment for printing money. In 2015, the budget for printing money is expected to increase further, from NIS 89.3 million in 2014 to NIS 176.7 million in 2015 due to the issue of the new series of banknotes. An additional 24.3 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 implementation 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.

C.   Selected Long-Term Projects in the 2014 Budget

The issue of a new currency series
During the second half of 2014, the preparations for starting the process of issuing a new series of banknotes to the public will be completed. 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 worldwide, including Israel, to replace the series of banknotes in circulation every 10–15 years.

Establishing new infrastructure for receiving regulatory reports from the banking system

In 2013, the Bank began a project to establish a new system for receiving reports sent by the banks to the Banking Supervision Department, and adopted the XBRL international reporting standard.  As part of the project, the reporting methods and receipt of data will be adjusted to the international standard and an advanced data reception system will be implemented.

Project to centralize data on housing in Israel

The housing issue is at the core of economic policy, and relies on a large amount of information gathered on the housing and real estate market in Israel.  In order to ensure the efficient concentration of real estate data in the Israeli economy, the Bank of Israel is continuing to expand the existing database and to integrate it with the Bank’s central data warehouse so that it will include most of the information on the real estate and housing market in Israel and best serve users within the Bank and decision-makers outside it.

Infrastructure renewal and renovation of the Bank's premises in Jerusalem

As discussed and approved in December 2012 by the Supervisory Council, the Bank of Israel’s headquarters premises in Jerusalem will be renovated.  This is an implementation of decisions reached in 2006 after assessing many alternatives.  The renovation budget was set with the aim of bringing the building’s infrastructure in line with protection against earthquakes, fulfilling the requirements of authorities, such as fire prevention requirements, upgrading the physical infrastructure and carrying out finishing work of a standard that is accepted in government ministries.  The work is necessary in order to avoid damage to life and to ensure the continued functioning of the Bank at all times.  The total 2014 budget for the project is identical to what has already been approved, and includes NIS 20 million in 2014 and an approved commitment for three additional years totaling NIS 157 million.

Establishment of a technology and emergency center

It is becoming increasingly necessary to advance preparedness for functioning in emergency situations, in light of the State of Israel’s threat map and in view of attempts by hostile elements to harm infrastructure essential to the economy, including financial infrastructure.  As such, the Bank of Israel has given high priority to the business continuity of its systems during emergencies, and is following an orderly program to increase its preparedness for various threats such as cyber-attack, war, earthquake, extreme weather and epidemic.

With the approval of the Urban Building Plan for the government complex, the project to establish a technology and emergency center became operational with the aim of ensuring the functional continuity of the technological systems and the Bank’s energy supply, during both routine and emergency periods.  With this in mind, in December 2013, the Supervisory Council approved a budget for building the center, totaling NIS 1.5 million, for 2014, and an approved commitment of NIS 72.5 million spread over an additional four years.


[1] This is the third year in which the Bank's budget has been approved by the Supervisory Council, the body charged with supervising the administrative activities of the Bank of Israe. The Supervisory Council consists of members from among the public—Mr. Dan Propper, Chairman; Mr. Ytzhak Edelman, CPA; Mr. Uri Galili; Prof. Nina Zaltzman; Mrs. Maxine Fassberg—and a member from the Bank—Dr. Karnit Flug.



Table 1: The Bank of Israel’s Budget for 2014
(Financial data in NIS thousand)
Expenditure budget
Transfers from 2013
Permitted commitments for coming years
Personnel ceiling
Original 2013 budget
Actual expenditure 2012
Bank of Israel
Total excluding currency issue
Management and Central Services
Performance of Bank’s functions
Representative office abroad
Currency issue