Supervision of the banking system
The banking system plays a major role in any modern economy. The public entrusts it with most of its savings, and that money is used by the banks, in part, to provide the credit necessary for businesses and households.
The essential functions of the banking system, and the recognition that a failure in this system will have a major impact on the functioning of the economy, make it necessary to maintain a system of supervision over the banks. Section 4(7) of the Bank of Israel Law states that the Bank of Israel must engage in “supervising and regulating the banking system”. This includes:
- Supervision of the stability of the banking corporations in terms of protecting depositors’ money.
- Maintaining the proper conduct of the banking corporations.
- Maintaining fairness in the business relations between the banks and their customers.
The Banking Supervision Department publishes all the laws, directives, and guidelines pursuant to which the banking corporations must operate.