22.04.2010
 
The Bank of Israel held a reception yesterday on the occasion of the passing of the new Bank of Israel Law
 
Yesterday the Bank of Israel held a reception following the passing of the new Bank of Israel Law. Present at the event, which took place in the Bank of Israel, were the Prime Minister, the Minister of Finance, the Speaker of the Knesset, the Chairman of the Finance Committee, members of the committees for examining the Bank of Israel Law (the Zussman Committee and the Levin Committee), senior employees of the Bank of Israel, and others who participated in the process of drafting the law and getting it approved by the Knesset. At the reception, the Governor, Stanley Fischer, expressed his appreciation to all those inside and outside the Bank who had been involved in the various stages of the Law for more than a decade, and thanked them for their important contribution.
The old Bank of Israel Law was legislated in 1954, and already by the 1990s it was clear that it was unsuitable for the modern economic reality. Two committees that grappled with the issue presented their recommendations; nevertheless, the legislative process took a long time. Last fall, the inter-ministerial committee for legislation approved the legislative memorandum, and in February discussions commenced in the Knesset. After a series of comprehensive discussions in the Finance Committee, the Law passed its second and third readings in the Knesset on March 16, 2010, and will officially come into force on June 1, 2010,
The Governor spoke about the important innovations contained in the new law. Firstly, it defines the bank's objectives precisely and ranks them as follows: maintaining price stability, supporting other goals of the government's economic policy—particularly growth, employment and the reduction of social gaps—and supporting the stability of the financial system.
The new law explicitly gives the Bank independence in determining its policy tools and the way of implementing them in order to achieve the objectives. This independence, however, goes hand in hand with transparency, and accountability to the Knesset, the government and the public. The Law also changes the framework in which major decisions are made in the Bank of Israel. The previous law stipulated that the Governor alone would decide about the Bank's policy and its management. According to the new Bank of Israel Law, decisions regarding the rate of interest and monetary policy in general will be made by a Monetary Committee, while the managerial decisions, including all matters related to the salaries of the Bank's employees, will be approved by an Administrative Council. Both the Monetary Committee and the Administrative Council will include external members with appropriate professional skills.
The Law also stipulates the way in which salary changes for the Bank's employees will be approved. After being approved by the Administrative Council, the changes will be submitted for approval to the Minister of Finance. In the event of disagreement about salaries between the Minister of Finance and the Bank, the matter will be resolved by the Prime Minister. The new Law also states that with regard to the salaries of the Bank's employees, the Minister of Finance and the Prime Minister should take into consideration, among other things, the Bank's unique personnel requirements and the labor relations within the Bank.
The Bank of Israel has already commenced the logistic preparations for integrating the members of the Committee and the Council, so that once they are chosen by the search committee to be set up by the government, they will be able to start working immediately.