The Bank of Israel is the central bank of Israel, established in 1954 and headquartered in Jerusalem. It is responsible for managing the country's monetary policy, maintaining the stability of the Israeli currency (the Israeli Shekel, or ILS), and ensuring the stability and soundness of the financial system. The Bank of Israel operates independently of the Israeli government, reporting to the Knesset (Israel's parliament) and the public.
The main functions and responsibilities of the Bank of Israel include:
- Monetary policy: The Bank of Israel is responsible for formulating and implementing Israel's monetary policy, with a primary objective of maintaining price stability by controlling inflation. To achieve this, the central bank sets key interest rates, manages the money supply, and conducts open market operations.
- Currency issuance and management: The Bank of Israel has the exclusive authority to issue and manage the Israeli Shekel. It is responsible for the design, production, and distribution of banknotes and coins, as well as maintaining the integrity and stability of the national currency.
- Foreign exchange reserves management: The Bank of Israel manages the country's foreign exchange reserves to ensure sufficient liquidity for international obligations, support the value of the Israeli Shekel, and maintain public confidence in the financial system.
- Supervision and regulation of the financial system: The Bank of Israel plays a key role in supervising and regulating the country's financial system, including banks and other financial institutions, to ensure its stability and soundness. This involves setting prudential regulations, monitoring financial institutions, and acting as a lender of last resort during financial crises.
- Oversight of the payment system: The Bank of Israel is responsible for the regulation and supervision of the payment system in the country to ensure its safety, efficiency, and integrity.
- Economic research and analysis: The Bank of Israel conducts research and analysis on various economic and financial topics to support the formulation of monetary policy and provide valuable information to policymakers, financial professionals, and the public.
By fulfilling these functions, the Bank of Israel plays a crucial role in fostering sustainable economic growth, maintaining price stability, and promoting the overall well-being of the people of Israel.