In accordance with Section 38 of the Bank of Israel Law, 5770-2010, a "reserve requirement" is imposed on banking corporations. This is a requirement to hold "liquid assets" as a reserve in accordance with the Liquidity Directives.
Liquid assets are part of the monetary base and include the cash in banks' vaults and banks' current accounts at the Bank of Israel.
The reserve ratio depends on the type of deposit—6 percent on current accounts, 3 percent on a deposit with a term of one week to one year, and no reserve is required on deposits of more than one year.
Beginning on January 27, 2011, a reserve requirement of 10 percent has been imposed on foreign exchange derivative transactions (swaps and forwards) with nonresidents.
The Bank of Israel does not pay interest to banks on required reserves or on surplus reserves.