Issuing Currency and regulating and guiding the cash system of the economy
The Functions of the Bank of Israel: Issuing Currency and regulating and guiding the cash system of the economy
Section 44(a) in the Law grants the Bank of Israel the sole right to issue currency in Israel (banknotes, coins, and commemorative and special coins). The quantity and value of banknotes and coins in circulation are affected by several factors, such as changes in the extent and number of transactions, the rate of inflation, population growth, and the use of automated teller machines, checks, and credit cards.
Section 4(6) in the Law states that one of the bank's functions is "Issuing Currency and regulating and guiding the cash system of the economy". Accordingly, one of the funcrtions of the Currency department is to ensure a regular supply of banknotes and coins in accordance with public demand. This involves action at several levels:
Planning denominations - Planning the appropriate denominations of banknotes and coins that will concurrently enable the public to carry out its cash transactions efficiently and minimize the cost of issuing new currency.
Designing banknotes and coins - The Governor of the Bank of Israel determines the form of banknotes and coins with the approval of the Administrative Council and the Government. (as per Section 42 in the Law). For this purpose, the Governor consults with the Public Committee for the Planning of Banknotes and Coins, which reviews the various proposals and chooses those that will be presented to the Governor for approval.
Ordering banknotes and coins - By correctly predicting demand for banknotes and coins and planning the ordering and supply by means of international tenders, maximum savings can be made in stockholding costs and the inevitable expenses incurred in every order. Banknotes are printed and coins minted abroad, since the requirements of Israel's economy do not justify the establishment of a printing press or mint in Israel.
Storage - When they arrive from abroad, banknotes and coins are stored in the vaults of the Bank of Israel, requiring strict transport arrangements, rigorous security, and meticulous control.
Supply of cash - Cash is supplied to the public via the commercial banks and the Postal Bank, which order the required quantities from the Bank of Israel in accordance with supply and demand expressed by deposits and withdrawals made by the public.
Overseeing the quality of currency in circulation - Banknotes that the banks deposit with the Bank of Israel are carefully counted and authenticated, using sophisticated equipment that also sorts the notes into those which are reusable and those to be shredded. Degraded coins are destroyed.
Prevention of counterfeiting - The Department takes action to detect counterfeit banknotes and remove them from circulation by studying the characteristics of counterfeits in the market, upgrading the safety markings that appear on currency, enhancing the public's awareness of these markings by advertising and instructional activities, and cooperating with the police, the Association of Banks, the banks, and international organizations that are active in the war on counterfeiting.
Issuing commemorative coins - The Governor determines the form of commemorative and special coins per approval of the Administrative Council and the government. For this purpose, he/she avails him/herself of the Public Committee for the Planning of Banknotes and Coins. The Bank issues commemorative coins annually and for special occasions. These are generally made of gold or silver and are sold to collectors and the public through the Israel Government Coins and Medals Corporation, Ltd.
Service to the public - Exchanging old currency for current legal tender, making change and exchanging coins for banknotes, and replacing degraded currency.
Information for the public - The Department responds to enquiries from the public on currency-related topics and publishes information about safety markings on currency.