Bank of Israel

   The question of creating a central bank was discussed in the early days of Israel's statehood, but the matter was temporarily shelved due to the more immediate challenge of fighting for Israel's survival in its War of Independence (1948—49). The immediate focus was on the matter of issuing a currency for the new state. This was addressed in the Bank Notes Ordinance, 5708-1948, which came into effect on 17 August 1948. The ordinance defined the authority to issue banknotes in a charter between the provisional Council of State and the Anglo-Palestine Bank (a private corporation founded by the Zionist Movement in 1903 and later known as Bank Leumi Le-Israel B.M.). The other functions normally associated with a central bank, such as regulating and directing monetary policy and banking supervision, were temporarily housed with Israel's Ministry of Finance.

   The Bank of Israel Law, 5714-1954 was adopted by the Knesset on 24 August 1954 and took effect on 1 December 1954. On that same day, the Bank of Israel was officially established. The functions of the Bank of Israel were defined in section 3 of the law as follows: "to administer, regulate and direct the currency system, and to regulate and direct the credit and banking system in Israel, in accordance with the economic policy of the government and the provisions of the Law, with a view to promoting by monetary measures (1) the stabilization of the value of the currency in Israel and outside Israel; (2) a high level of production, employment, national income and capital investments in Israel." Under the provisions of the Bank of Israel Law and subsequent implementing legislation, the Bank of Israel has a range of responsibilities. These include regulating and directing monetary policy, offering economic advice to the government, managing Israel's foreign exchange reserve, supervising banking, promoting financial stability, and issuing currency. The Bank of Israel operates independently of the government.

   The governor of the bank is appointed by Israel's president on the recommendation of the government. The first governor of the Bank of Israel was David Horowitz, who served from 1954 to 1971. Other governors of the Bank of Israel have included Moshe Sandbar (1971-76), Arnon Gafny (1976-81), Moshe Mandelbaum (1982-86), Michael Bruno (1986-91), Ya'akov Frenkel (1991-2000), and David Klein (2000-2005). Since 2005, the governor of the Bank of Israel has been Stanley Fischer.