About the Banking Supervisio​n Department

Regulating and supervising the banking system
The banking system plays a central role in every country. The public deposits most of its monetary savings in the banks, and the banks, among other things, use that money to give credit to businesses and households. The public's bank accounts are used to implement a major part of payments made in the economy, and activity in foreign currency also takes place mainly via the banks. The need to regulate and supervise the banking system arises from the vital role that the system plays, from the recognition that the public's money must be protected, and the fact that a failure in the system is likely to have a severe impact on the
functioning of the economy and those who deposited their money in the banks.

The functions of the Banking Supervision Department
• Supervising the stability of the banking corporations––avoiding excess risks to their stability and protecting depositors' money;
• Ensuring that the banking corporations are managed properly;
• Maintaining fairness in bank/customer relations


A corporation that wants to be a banking corporation and anyone who wants to hold five percent or more of the shares of a banking corporation must obtain a permit. Permits are granted after a comprehensive examination and discussion in the Licenses Committee. This is intended to ensure the bank's ability to operate, and to prevent unsuitable parties from engaging in banking, or from owning or wielding significant influence on a banking corporation. A bank's activity is subject to rules and limitations in the area of proper management and risk control––rules regarding the structure of the board of directors and
how it operates, adequate capital requirements taking into account the extent of the bank's risk-weighted assets, restrictions on the maximum size of loan that can be given to a single borrower and to parties with connections with the bank, etc. The Banking Supervision Department performs bank inspections and assesses each bank's activity, based on the large amount of information that it receives from them. The purpose is to assess their stability and their business situation, to prevent them from taking excessive risks, and to ensure the observance of the directives relating to the proper management of banking business issued by the Supervisor of Banks. Based on the findings, the Banking Supervision Department acts to correct the flaws, if any, and in cases of serious deficiencies even imposes sanctions.

The Bank of Israel acts to increase public supervision over banks' activity; it does so mainly by extending banks' obligations regarding proper disclosure of their business situation, their activities in the customer services field, and prices of their services. Customers who feel that they have been treated wrongly by a bank can submit a complaint to the Public Enquiries Unit in the Banking Supervision Department in the Bank of Israel. The Unit investigates the complaint, and advises the customer and the bank of the results of its investigation. If the complaint is found to be justified, the bank must correct the fault. Further information on how to submit a complaint is available on the Bank's website. The Bank of Israel carries out and publishes research on banking issues, and produces an annual review that describes and analyzes developments in Israel's banking system. In that way it broadens and deepens
professional knowledge in that area, promotes the understanding of the processes in the system, and thus helps to strengthen the system, while also helping to discover any weaknesses and deal with them.

 

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