Knesset passes bank law, Fischer agrees to stay for 2nd term

“There is broad consensus in the world and in Israel that Fischer is doing an excellent job for the Israeli economy,” PM says.

By SHARON WROBEL
March 18, 2010 06:36
4 minute read.
Prime Minister Binyamin Netanyahu with Bank of Isr

stanley fischer binyamin netanyahu bff 311. (photo credit: AP)

 
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Governor of the Bank of Israel Prof. Stanley Fischer on Wednesday accepted the offer to stay in his post for a second term after the new Bank of Israel Law was passed this week.

“It is an honor and privilege to stand here as an Israeli citizen and to accept Prime Minister Binyamin Netanyahu’s and Finance Minister Yuval Steinitz’s offer to remain for another term in the leading position of one of the most important institutions in Israel, the Bank of Israel,” said Fischer at a press conference in Jerusalem on Wednesday.

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“I can not think of anyone better suited than you [Fischer] to continue in the job. There is broad consensus in the world and in Israel that Fischer is doing an excellent job for the Israeli economy,” said Netanyahu at the press conference.

“We appoint you for a second term, to continue the good work. We need a strong and independent central bank.”

Fischer’s decision comes a day after the new Bank of Israel Law was passed in second and third reading in the Knesset. The law’s approval was one of the main factors affecting Fischer’s decision to stay in office.

“Today I am as emotional and excited as I was five years ago when I took up the post; and even more so after the Knesset approved the new Bank of Israel Law and we can finally replace an old law that dates back to 1954. It was in fact the only promise I was given from then-prime minister Ariel Sharon,” said Fischer.

“Five years ago I couldn’t have imagined what would happen and that I would have to cope with a global crisis of this magnitude. It was a challenging period – more than I would have thought.”

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Industry, Trade and Labor Minister Binyamin Ben-Eliezer said that thanks to Fischer, the Israeli economy managed to weather the worst global recession since World War II with minimum damage.

“Fischer advanced the approval of the new Bank of Israel Law, which will place the central bank on the same level with global central banks in the developed world,” said Ben-Eliezer. “Just as Fischer succeeded in leading us through an economic storm and a big crisis, as the signs of an emergence out of the crisis are strengthening, the governor will contribute a great deal to bring the Israeli economy back to strong growth and prosperity.”

Looking back at his first five-year term, which comes to a close at the end of April, Fischer said he was very proud of the achievements made during that time.

“We signed a historical wage agreement at the central bank and saw the new Bank of Israel Law pass in the Knesset,” said Fischer. “You will agree with me that when we entered the global economic crisis we were much more prepared relative to other countries and we managed to overcome it with great success.”

Fischer emphasized that starting with his second term, he will begin immediately with the implementation of the new Bank of Israel Law.

Speaking at a conference last week, Fischer said that part of the future of the Bank of Israel starts with the approval of the new Bank of Israel Law, making the central bank more modern in setting targets which are more appropriate for the 21st century. One such provision is the new decision-making process for interest rates which establishes a monetary committee replacing the role of the governor as the sole decision maker.

The new Bank of Israel Law determines price stability as the central bank’s priority goal.

“We will do our best to bring the economy back to growth levels of 5 percent – but this will not only depend on us but also on what is happening around the world,” said Fischer. “At the same time, we will maintain price stability and financial stability.”

Under the new Bank of Israel Law, the bank’s administration will consist of a governor, a monetary committee, and an administrative council. The monetary committee will have authority over setting interest rates, which until now has been solely decided by the governor. The committee will consist of six members – including the governor, who will serve as chairperson, the deputy governor, a bank employee appointed by the governor and three additional representatives from the public sector.


The administrative council will have seven members – the governor, the deputy governor and five members from among the public. It will be responsible for the supervision of the orderly and efficient management of the central bank; approval of the annual work plan and budget for the central bank’s administrative activity; and the central bank’s salary structure. However, the Finance Ministry’s wages director will continue to supervise the salaries paid to the central bank’s employees, with any differences of opinion to be resolved by the prime minister.

Another provision allows the bank, in exceptional circumstances where the stability of
the financial system is threatened, to extend credit to non-bank entities.

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