The Functions of the Bank of Israel: Regulating the economy's payment and clearing systems

Payment and settlement systems are vital parts of the economic and financial infrastructures of modern economies, and their efficient functioning contributes to the economies' development and financial stability. Section 4(5) of the Law states that one of the bank's functions is "Regulating the economy's payment and clearing systems so as to ensure their efficiency and stability".


The Bank of Israel acts in various ways to promote the safety, reliability, and efficiency of payment and settlement systems and to mitigate settlement risks. In this context, the Bank carried out a comprehensive reform of Israel's payment and settlement systems in recent years in order to meet international standards set forth by the Bank for International Settlements (BIS).   

The jewel in the crown of this reform was the establishment of a Real Time Gross Settlement (RTGS) system, known in Israel as ZAHAV (a Hebrew acronym for "real-time credits and transfers" and a metonym denoting "gold"). The system, inaugurated in July 2007, is managed by the Accounting, Payment and Settlement Systems Department of the Bank of Israel.   

With the activation of ZAHAV, Israel's financial system completed an important move that positioned it among the world's most advanced countries.   

The launching of ZAHAV also allowed the shekel to be integrated into clearing at the CLS (Continuous Linked Settlement) Bank, significantly reducing the risk associated with the conversion of the shekel into currencies that participate in the CLS settlement system.   

The Bank of Israel's Accounting, Payment and Settlement Systems Department discharges the following main duties:   

  • Policymaking in regard to payment and settlement systems, including initiating reforms and changes in these systems, doing the same in regard to means of payment, bringing the payment and settlement system into compliance with accepted international standards; collecting and managing information about payment systems in Israel for international comparison; maintaining ongoing relations with international entities and other central banks in regard to changes and trends in this field; establishing principles and standards for the business continuity of payment systems; and providing information and instruction to those involved. As the operator of the ZAHAV (RTGS) system, the Bank of Israel is asked to determine and to periodically update the rules for the system's activity. These rules are part of the agreement that exists between the Bank of Israel and the commercial banks and the payment systems that participate in ZAHAV. 
  • Supervision of payment and settlement systems in order to assure their stability and safety, including supervision of audited payment systems as this term is defined in the Payments and Settlement Law, 5768-2008; supervision of CLS Bank in conjunction with other central banks whose countries' currencies are settled by CLS; establishing supervisory principles and regulations for each clearinghouse; gathering information for use in declaring a payment system as an audited one; writing periodic and annual audit reports; and participating in international forums that deal with the supervision of payment systems. 
  • Operation of clearing houses: The Bank of Israel operates the ZAHAV system and the paper-based (checks) clearing house. As such it is responsible mainly for the following: regular monitoring of the activity in the systems and of their users in order to anticipate failures; dealing with operating, technical or business failures of the system or of users; providing regular telephone support for system participants (commercial banks, the Postal Bank, other clearinghouses); and monitoring and control of shekel settlements by CLS via ZAHAV. 
  • Managing the channels of communication: The activities of the systems for which the Payment and Settlement Systems Unit in the Bank of Israel is responsible require electronic links with financial institutions in Israel and abroad. These links are maintained by means of various communication interfaces and appropriate applications, including "Shva," "Kasefet" and a system that sends and receives secured dedicated electronic messages between financial institutions around the world, managed by the international organization SWIFT. The Unit is responsible for managing the channels of communication to the participants in the SWIFT system and providing communication services to other parts of the Division, including providing solutions to non-technical problems and the design of new communication-related solutions.