(Communicated by the Prime Minister’s Media Adviser)
Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz will on Sunday, 5 July 2009, submit the draft Bank of Israel law for Cabinet approval. The law is due to specify the main areas of activity for the Bank, with emphasis on its goals, strengthening its independence and assuring transparency in its modus operandi.
The Bank of Israel and the Finance Ministry have for some time been working on the main provisions of the law and have recently concluded work on most of the subjects included in the draft law.
In recent weeks, on instructions from Prime Minister Netanyahu and with the mediation of Prime Minister’s Office Director-General Eyal Gabai, senior Finance Ministry and Bank of Israel officials have met to discuss the last outstanding issues. Following a decision by the Prime Minister, the draft law will be submitted to the Cabinet on Sunday. The Cabinet’s decision will be a significant and important stage ahead of the end of the legislative process for the new Bank of Israel law.
While the draft law ensures the independence of the Bank of Israel, it also demands transparency and allows for better oversight of Bank decisions.
According to the draft law, a six-member monetary committee, composed of three Bank and three public representatives, will be established to set monetary policy for the State of Israel, including interest rates. An administrative council will also be established to approve the Bank’s annual work plan and budget; most of its members will be public representatives.
The law also includes an oversight mechanism – decided upon by Prime Minister Netanyahu last week – for the salaries of Bank employees.
The current Bank of Israel Law is from 1954 and except for minor changes has not been amended to fit either the current economic reality or the functions and responsibilities of central banks around the world.
Legislating a new Bank of Israel law has been on the public agenda since the 1990’s. Upon taking office, Prime Minister Netanyahu instructed that the preparation of a new Bank of Israel law be completed as quickly as possible in order to provide the Bank with the tools to conduct a modern monetary policy such as takes place in the leading countries of the world.