Flug steps in as Bank of Israel Governor pending Frenkel approval

With Stanley Fisher's term as Bank of Israel Governor completed, his deputy Karnit Flug steps into role of acting governor.

July 1, 2013 05:48
1 minute read.
Outgoing BoI Governor Stanley Fischer 370

Outgoing BoI Governor Stanley Fischer 370. (photo credit: Marc Israel Sellem/The Jerusalem Post)

With Stanley Fischer's eight-year term as Bank of Israel Governor completed as of Sunday night, his deputy Karnit Flug stepped into the role of acting governor on Monday.

With Fischer gone, the monetary committee that decides key rates will be reduced to five members. The odd number means Flug will not have normal governor's advantage of breaking ties in evenly split votes, as is normally the case.

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Absent unforeseen circumstances, she will continue to hold the position until Jacob Frenkel, a former governor who Prime Minister Binyamin Netanyahu and Finance Minister Yair Lapid nominated just a week before Fischer's final day on the job, is approved for the position.

Frenkel must pass muster with a committee headed by Judge Yaakov Turkel, get President Shimon Peres's blessing, and then be approved by the cabinet.

Depending on how quickly that happens, Flug could conceivably hold the position for a number of months; after David Klein stepped down from the position in 2005, Meir Sokoler acted as governor for three and a half months until Fischer was formally approved.

Fischer selected Flug as his deputy in 2011, and he was widely believed to have wanted her to serve as his successor, a prospect several members of Knesset publicly supported as well in the run-up to Frenkel's nomination.

Frenkel's approval faces a number of difficulties. For one, there is a legal question as to whether he is legally permitted to return for a third term as governor, having served twice in the 1990s. For another, the state comptroller forced him to return money to the government following the conclusion of his last term, alleging that he took hefty pay inappropriately. Finally, Frenkel's role at AIG during the 2008 financial crisis may come back to haunt him, though he has not taken responsibility for the company's spectacular near-implosion.

Flug, who completed her doctorate at Columbia University, served as an IMF economist before joining the Bank of Israel in the 1980's.

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