Banking Supervisor Yoav Lehman released a draft version of guidelines on internal regulation structures within Israel's commercial banks that also sets clear milestones for evaluating the quality and effectiveness of the internal controls, the Bank of Israel said Tuesday. "A proper internal regulation system serves the banking corporation in reaching its goals on three central levels: goals in areas of [the bank's] business operations; maintaining the agility of the managerial and financial reporting systems; as well as the banking corporation's compliance with laws, regulations and instructions to which it is subject and internal rules that it set for itself," Lehman said. His office instructed the banks to appoint senior risk supervision management professionals to implement the guidelines and meet with the Bank Supervising Office towards a final draft of the guidelines. A deadline for implementing the draft guidelines will be set in contacts with the banks, the central bank said. The quality of the internal controls will be judged in terms of several key components, including managerial supervision and the regulatory culture and environment within the bank; identification and evaluation of risks; supervisory activity and the separation of responsibilities; communications and reliability and accessibility of information; as well as monitoring activities and efforts to correct problems. Lehman based the draft on the principles advocated by the Treadway Commission's Committee of Sponsoring Organizations (COSO), which were elaborated in the report of the Basel Commission of central banks. In anticipation of the banking regime that will result from Basel II accords, commercial banks in Israel have already begun integrating guidelines related to the regulation of financial statements, which must be implemented in 2007 yearly reports, the central bank said.