To 2015 Work Plan (Hebrew)

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 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 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);
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 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.

 

Table 1: The Bank of Israel’s Budget for 2015
(financial data in NIS thousand)

 

 
 
2015
 
 
 
 
 
 
budget
 
Transfers from 2014
Permitted commitments for coming years
 
 
Personnel ceiling
 
 
 
Original 2014 budget
 
 
 
Actual expenditure 2013
 
Bank of Israel
894,309
34,221
698,949
770
939,325
767,917
 
Total excluding currency issue
========
817,797
=====
34,221
=====
427,525
=====
770
===
850,019
=====
624,563
=====
01
Management and Central Services
223,256
2,460
62,416
321
212,320
175,891
02
Performance of Bank’s functions
193,305
780
42,147
447
189,775
164,320
03
Representative office abroad
3,423
 
819
2
3,284
2,632
04
Pensions
295,502
879
21,836
 
259,966
226,631
05
Investments
83,831
30,102
299,440
 
87,209
55,594
06
Income
(6,815)
 
 
 
(780)
(505)
07
Reserve
24,861
 
 
 
98,245
 
08
Currency issue
76,512
 
271,423
 
89,306
143,354
09
Operation of the Citizens of Israel Fund for natural gas profits
434
 
868
 
 
 
 
 
 
 
 
 

[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 Baudot-Trajtenberg.
 
[2] The Citizens of Israel Fund Law, 5774-2014.