BANK OF ISRAEL

Office of the Spokesperson and Economic Information

January 6, 2014

Press Release

The Bank of Israel publishes its 2014 work plan and budget

1. The main targets in this year's work plan deal with advancing reforms in the financial system, adjusting risk management of the foreign exchange reserves in view of the growth in the reserves portfolio, and developing a framework for strengthening the financial stability of the economy.

2. The Bank of Israel's total budget for 2014 is NIS 939.3 million, of which NIS 89.3 million is earmarked for currency issue.

3. The reserve budget for 2014 is NIS 98.2 million, and includes a total of NIS 64.8 million in respect of an agreement that has not yet been signed to index pensions to the Consumer Price Index.

4. Excluding the "reserve" area of activity, the Bank's budget for 2014 totals NIS 841.1 million, representing nominal growth of 1 percent, which is lower than the inflation projection set in the State budget.

Mr. Dan Propper, Chairman of the Bank of Israel Supervisory Council, said, "The Supervisory Council believes that the Bank of Israel budget for 2014 will enable the Bank to continue to fulfill its functions, which are vital to the Israeli economy, and to maintain the capabilities required of it, through responsible and calculated budget management. The work plan reflects the complex challenges faced by the Bank in the near future, from both the policy side and administrative standpoints, and lays the groundwork for dealing with these challenges."

The Bank of Israel today is publishing the main provisions of its work plan and administrative budget for 2014.

The Supervisory Council[1]discussed the Bank's annual work plan and published its main points, approved the Bank's annual budget for administrative activities, and submitted it in the Knesset Finance Committee, as required by the Bank of Israel Law, 5770-2010.

Today, the Knesset Finance Committee discussed the Bank's annual budget, presented below, which encompasses the administrative activities of the Bank and is constructed in order to allow the Bank to carry out its functions and achieve its primary targets for the coming years.

A. Main Targets

The Bank's main targets for the coming years as determined by management are shown below:

· Promotion of reforms in the financial system (including the banking system) and the capital market-The Bank will act to implement reforms in order to lead to enhancing the sophistication of the market and improving the manner in which financial and private institutions manage their risks. Accordingly, the Bank-together with the Ministry of Finance and other regulators-will create conditions for increasing competitiveness in the domestic financial system, while maintaining its stability. In addition, the Bank continues to improve the efficiency and stability of the payment and settlement systems, and for this purpose is establishing the oversight of these systems.

· Expanding the foreign exchange reserves market risk management and adjusting it to the risk profile set by the Monetary Committee-In view of the increase in the foreign exchange reserves, the Monetary Committee adjusted the risk profile for managing foreign exchange reserves as part of the guidelines. The risk profile reflects the desired balance between risk and return, in line with the goals of holding the reserves.

· Development of a macroprudential framework for strengthening the economy's financial stability-Macroprudential policy is intended to strengthen the financial system's capability to withstand possible shocks. This policy includes studying the potential threats to financial stability, identifying them beforehand and taking measures to reduce risk. As part of this framework, the Monetary Committee holds periodic discussions on the state of financial stability, while using stress tests. In addition, the Bank, in conjunction with the Ministry of Finance and the Israel Securities Authority, is promoting the establishment of a financial stability committee that will include representatives of the Ministry of Finance, the Bank of Israel and other regulators.

· The issue of a new currency series

· Advancing measures to ensure business continuity of the financial system and of the Bank of Israel


B. The Bank's Budget

The Bank of Israel's budget allocates funds for the administrative activities of the Bank necessary for fulfilling of its functions and achieving its goals. In accordance with the Bank of Israel Law, the Bank of Israel's budget is divided into several areas of activity:

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