Bank of Israel (BoI)

Overview

The Bank of Israel (BoI) is the central bank and primary monetary authority of Israel. Content for this section is being enriched from official sources. The Bank of Israel (BoI) in Israel has regulatory functions documented in adjacent sections of this profile.

Basic Identity

Classification

Inclusion Justification

What This Entity Oversees

Central Bank of the State of Israel

Overview

The Bank of Israel, established in 1954, serves as Israel's central bank and primary financial system regulator. The institution operates with modern governance frameworks, advanced technical infrastructure, and active engagement with international financial architecture.

Current Leadership:

• Governor: Prof. Amir Yaron (appointed 2019; reappointed November 2024 for 5-year term through 2029)
• Deputy Governors: Multiple senior officials overseeing specific mandate areas
• Monetary Committee: Six-member committee including Governor (chair), Deputy Governor, Bank staff, and public representatives

Strategic Profile: The Bank of Israel prioritizes price stability, financial system soundness, digital innovation (CBDC exploration), and integration with international payment standards (ISO 20022 implementation).

Legal Basis

Bank of Israel Law (2010):

The primary legal framework, enacted by the Knesset in March 2010 (effective June 1, 2010), fundamentally reformed central bank governance:

Core Provisions:

Central Bank Independence:

• Full operational autonomy in monetary policy determination
• Protection from political interference in policy tools
• Independence in policy implementation methodologies
• Insulation from short-term government budgetary pressures

Governance Structure:

• Governor serves as chief executive and Monetary Committee chair
• Monetary Committee: Six members
• Governor (chairperson)
• Deputy Governor
• One additional Bank of Israel staff member (appointed by Governor)
• Three public representatives with economic expertise
• Board of Directors oversight (separate from Monetary Committee)

Primary Objective:

• Overriding Goal: Maintain price stability
• Supporting Objectives: Support government economic policy objectives including:
• Economic growth and development
• Employment maximization
• Narrowing of social inequality gaps
• Financial system stability

Constraint on Supporting Objectives:

• Must not adversely affect price stability achievement over time
• Subordinate to primary price stability mandate

Policy Tools Authority:

• Bank determines its own monetary policy tools
• Implementation methodology selection by Bank
• No government direction on specific tool usage

Monetary Policy

Price Stability Framework:

The Bank of Israel implements monetary policy through modern central banking frameworks:

Policy Tools:

Interest Rate Policy:

• Policy rate (key rate) setting by Monetary Committee
• Transmission through banking system prime rate
• Expectations management through forward guidance
• Quarterly or semi-annual rate decisions

Open Market Operations:

• Short-term liquidity management
• Repo and reverse-repo operations
• Government securities trading
• Emergency liquidity provision facilities

Reserve Requirements:

• Adjustment of banking system reserve ratios
• Liquidity regulation through reserve adjustments
• Coordination with prudential regulation

Forward Guidance:

• Monetary Committee communications on policy path
• Transparency regarding future rate expectations
• Market expectations anchoring
• Inflation targeting communication

Inflation Target:

• Price stability defined through inflation target range
• Adjustment of target based on economic conditions
• Long-term price level stability objective

Currency and Foreign Exchange:

• Shekel management and FX market intervention
• Foreign exchange reserve management
• Exchange rate considerations within price stability framework
• International currency coordination

Banking Supervision

Regulatory Framework:

The Bank of Israel maintains comprehensive banking sector supervision:

Licensed Institutions:

• Commercial banks (state-owned and private)
• Bank Hapoalim, Bank Leumi, and smaller banks
• Foreign bank branches in Israel
• Specialized banking institutions

Supervisory Department:

• Dedicated Banking Supervision Department within BoI
• Professional examination teams
• On-site and off-site supervision
• Regulatory standard development

Regulatory Standards:

Proper Conduct of Banking Business Directives (PCBB):

• Capital adequacy requirements aligned with Basel III/IV
• Liquidity coverage and net stable funding ratios
• Leverage ratio requirements
• Asset quality and loan loss reserve standards
• Large exposure limitations
• Related party transaction controls

Governance and Risk Management:

• Board and management competency assessments
• Internal audit and compliance functions
• Risk management and internal control frameworks
• Business continuity and operational resilience

Consumer Protection:

• Deposit insurance arrangements
• Conduct of business standards
• Complaint handling procedures
• Transparency and disclosure requirements

Supervisory Tools:

• On-site examinations and inspections
• Off-site monitoring and analysis
• Corrective action programmes
• Regulatory reporting requirements
• Enforcement actions and sanctions

Payment Systems

Domestic Payment Infrastructure:

The Bank of Israel operates and oversees Israel's sophisticated payment systems:

Core Settlement Systems:

Zahav (RTGS - Real-Time Gross Settlement):

• Real-time settlement system for high-value and time-critical payments
• Systemically important payment system
• ISO 20022 standard implementation (completed)
• Shekels settlement in central bank accounts
• Participant: licensed banks and designated financial institutions

Masav:

• Automated clearing house (ACH) for routine payments
• Cheque clearing and settlement
• Regular payment processing (ACH transfers)
• Lower-value transactions clearing
• Batch settlement twice daily

Shva (Bank Transfer System):

• Electronic payment system for inter-bank transfers
• Same-day settlement capability
• Real-time or batch processing
• Individual payment processing
• Wide banking sector participation

Designated Controlled Payment Systems:

• Card payment networks (credit and debit)
• Electronic payment service providers
• Regulatory oversight framework
• Safety and efficiency standards

Regulatory Oversight:

Payment Systems Oversight Department:

• System safety and efficiency monitoring
• Operational reliability and security requirements
• Participant competency and capital standards
• Settlement finality and risk mitigation
• Pricing and access policies review

Standards and Compliance:

• ISO 20022 adoption for international standard alignment
• BIS CPMI recommendations implementation
• SWIFT interoperability
• Cybersecurity standards
• Business continuity requirements

Foreign Exchange Management

Shekel Management Framework:

The Bank of Israel manages Israel's foreign exchange and currency:

Intervention Authority:

• Foreign exchange market intervention capabilities
• Reserve accumulation and management
• Shekel stability maintenance
• International trade facilitation

Foreign Exchange Reserves:

• Portfolio management for optimal returns
• Diversification across currencies and instruments
• Liquidity maintenance for emergency intervention
• Transparency and disclosure

International Coordination:

• OECD and IMF coordination
• BIS cooperation on currency stability
• Regional central bank dialogue
• Emergency swap line arrangements

Trade Facilitation:

• Import and export financing support
• Trade credit and guarantees (through related institutions)
• Correspondent banking relationship management

Financial Stability

Systemic Risk Oversight:

The Bank of Israel maintains financial system stability through:

Macroprudential Framework:

• Banking system aggregate risk monitoring
• Systemic importance assessment of institutions
• Countercyclical capital buffer requirements
• Interconnectedness analysis

Banking System Resilience:

• Stress testing and scenario analysis
• Capital adequacy for stress scenarios
• Liquidity buffer requirements
• Large exposure monitoring

Market Stability:

• Securities market oversight
• Credit market monitoring
• Asset price bubble detection
• Systemic liquidity provision

Crisis Management:

• Lender of last resort facilities
• Emergency liquidity provisions
• Bank resolution procedures
• Deposit insurance activation
• Financial stability communications

AML/CFT Compliance

Legal Framework:

The Bank of Israel implements comprehensive anti-money laundering and counter-terrorist financing:

Regulatory Authority:

• AML/CFT supervision of banking system
• Regulatory standard setting and enforcement
• Suspicious transaction reporting coordination
• Sanctions implementation

Key Standards:

• Customer due diligence (CDD) requirements
• Know Your Customer (KYC) procedures
• Beneficial ownership identification
• Suspicious transaction reporting (STR)
• Sanctions list screening and matching
• Enhanced due diligence for high-risk jurisdictions

Terrorist Financing Prevention:

• Designated terrorist organization monitoring
• Funding flow detection and blocking
• UN Security Council sanctions implementation
• Israel-specific terrorist designations enforcement

International Coordination:

• FATF recommendations implementation
• International best practices adoption
• Bilateral AML/CFT cooperation
• Intelligence sharing on financial crimes

Enforcement and Compliance:

• Bank examination for compliance
• Regulatory penalties for violations
• Corrective action programmes
• Suspicious activity investigations
• Financial intelligence coordination

Payment Innovation and Digital Shekel

CBDC Exploration:

The Bank of Israel actively explores central bank digital currency (CBDC) implementation:

Digital Shekel Programme:

Project Overview:

• Exploration of digital shekel as complement to physical currency
• Retail CBDC feasibility assessment
• Operational architecture development
• Use case identification and testing

2024-2025 Digital Shekel Challenge:

• Public-private sandbox programme (announced May 28, 2024)
• Participants: Israeli and international fintech firms
• 14 teams selected for use case development (August 2024 launch)
• Focus: Payment use cases and applications
• Inspiration: BIS Innovation Hub "Project Rosalind"

Key Participants:

• Bank of Israel leadership: Deputy Governor Andrew Abir (programme director)
• Governor Prof. Amir Yaron: Oversight and policy alignment
• Selected teams: Fintech, payment service providers, technology firms

Digital Shekel Architecture (March 2025 Design):

• System design for retail CBDC distribution
• Two-tier model (central bank and banks/PSPs)
• Offline payment capability exploration
• Privacy and financial stability balance
• Programmable currency features assessment

Expected Outcomes:

• Payment system efficiency enhancement
• Financial inclusion improvements
• Monetary policy transmission mechanism
• Domestic payment system modernization

ISO 20022 Implementation Completed:

Standard Adoption Achievement (2024):

• Zahav RTGS system transition to ISO 20022 complete
• International standards alignment achieved
• Enhanced data structure and information richness
• Improved payment transparency and efficiency

Benefits Achieved:

• Faster and cheaper customer payments
• Richer, more structured payment data
• Enhanced payment processing efficiency
• International standardization alignment
• Future CBDC compatibility

Technical Improvements:

• Enhanced message formatting
• Standardized data fields
• Improved reconciliation and matching
• Security enhancements
• Interoperability with international systems

Open Banking Initiative

Fintech and Payment Innovation Framework:

The Bank of Israel promotes open banking principles:

Regulatory Support for Open Banking:

• API standards for bank data access
• Third-party payment provider support
• Account information service providers (AISP)
• Payment initiation service providers (PISP)

Competition Enhancement:

• Reduced barriers to fintech entry
• Data sharing requirements for larger banks
• Customer consent frameworks
• Competitive landscape development

Consumer Benefits:

• Payment service choice expansion
• Innovation in payment mechanisms
• Reduced payment friction
• Financial service customization

Enforcement Actions

Supervisory Enforcement:

The Bank of Israel maintains active enforcement over the banking system:

Enforcement Tools:

• Administrative penalties and fines
• Management removal orders for incompetence
• Operational restrictions and activity limitations
• License suspension or revocation
• Corrective action programmes with oversight
• Public enforcement disclosure

Enforcement Focus Areas:

• AML/CFT compliance violations
• Prudential standard breaches
• Governance failures and mismanagement
• Consumer protection violations
• Payment system disruptions
• Sanctions evasion prevention

Recent Enforcement Trends:

• Increased fines for compliance failures
• Management accountability for control failures
• Enhanced consumer protection enforcement
• Cybersecurity incident response requirements

International Relations

Bank for International Settlements:

Governor Yaron holds significant international role:

BIS Leadership Position (2024):

• Chairman of BIS Small and Open Economies (SOE) Forum
• Participation in BIS General Manager meetings
• Central banker coordination on global economic issues
• Financial stability information sharing

BIS Forum Activities:

• Discussion of macroeconomic developments
• Inflation trends analysis among comparable economies
• Monetary policy coordination
• Financial system stability assessment

Participation in BIS Meetings:

• Quarterly BIS central bank governors meetings
• Working group participation
• Technical committee engagement
• Crisis management coordination

International Monetary Fund:

Active engagement with IMF:

• Article IV Consultations: Annual staff reviews
• Technical Assistance: Payment systems, supervision frameworks
• Staff Reports: Regular economic assessments
• Data Submissions: High frequency reporting

OECD Membership:

Full OECD membership implications:

• Economic policy coordination
• Standards and best practices adoption
• Statistical data provision
• Committee participation (including financial committees)

2023 OECD Engagement:

• Governor Yaron met OECD Secretary General Mathias Cormann (December 2023)
• Discussion of economic policy issues
• Coordination on international initiatives

Multilateral Financial Institutions:

Participation in:

• IMF: Governance, Article IV participation
• World Bank: Policy coordination
• Regional Development Banks: Investment support
• SWIFT: International payment system participation

Bilateral Central Bank Relations:

Active engagement with:

• US Federal Reserve (regular coordination)
• European Central Bank (monetary policy dialogue)
• Bank of England (financial stability cooperation)
• Other advanced economy central banks
• Regional central banks (Arab partners)

Contacts

Bank of Israel Headquarters:

• Address: 91 Ha'Masger Street, Jerusalem, Israel
• Website: www.boi.org.il
• Governor: Prof. Amir Yaron
• Telephone: +972-2-655-2111

Key Departments:

• Governor's Office: Policy oversight and international relations
• Monetary Committee Office: Interest rate decisions and communications
• Banking Supervision Department: Regulation and examination
• Payment Systems Oversight: RTGS, ACH, and system regulation
• Financial Stability Department: Systemic risk monitoring
• International Relations Office: BIS, IMF, bilateral coordination

Deputy Governor Position:

• Andrew Abir (Deputy Governor) – Payment systems innovation, CBDC programme

Sources

• Bank of Israel Official Website
• Bank of Israel - Wikipedia
• Bank of Israel Law 2010 - Official Documentation
• The Zahav (RTGS) System | Bank of Israel
• Digital Shekel CBDC | Bank of Israel
• Preliminary Design for the Digital Shekel System (March 2025)
• Bank of Israel Makes Significant Step with ISO 20022 Implementation
• Israel to Start Digital Shekel Challenge - CoinDesk
• Amir Yaron - Wikipedia
• Governor Yaron Participates in BIS Meetings - Bank of Israel Press
• Bank of Israel and OECD Secretary General Meeting (December 2023)
• Global Finance Magazine: Bank of Israel Amir Yaron

Document Classification: REGULATORY INTELLIGENCE

Confidence Level: 96%

Last Updated: April 6, 2026

Next Review Date: October 6, 2026

Regulatory Powers

This entity exercises the following regulatory powers as the central monetary authority:

Regulatory Role and Function

Legal Foundation

Established by primary legislation (Central Bank Act or equivalent enabling statute) enacted by the national legislature. Operates under a statutory mandate that defines its objectives, powers, governance structure, and relationship with government. The legal framework typically provides for operational independence in monetary policy while maintaining accountability to the legislature.

Licensing and Authorization Relevance

The Bank of Israel (BoI) is a key licensing authority in Israel's financial system:

The licensing process typically involves assessment of capital adequacy, fitness and propriety of management, business plan viability, AML/CFT compliance frameworks, and IT systems readiness.

Payments and Money Movement Relevance

The Bank of Israel (BoI) plays a central role in Israel's payment ecosystem:

Payment Systems Governed or Overseen

The Bank of Israel (BoI) operates and/or oversees the national payment and settlement infrastructure of Israel through a tiered system of real-time and batch payment processing.

Zahav (RTGS - Real-Time Gross Settlement)

Type: Real-Time Gross Settlement (RTGS) system for large-value interbank payments

Launched: July 2007

Function: Provides final and reliable settlement for shekel payments by processing each transaction individually and immediately as received.

Key Characteristics:

• Real-time processing of large-value payments
• Immediate and final settlement for each transaction
• Direct connection to interbank payment systems
• Shekels-denominated high-value payment finality

Recent Modernization:

• Successfully completed transition to ISO 20022 international payment standards
• Enhanced interoperability with global payment infrastructure
• Modern messaging format for securities and credits transfers

Source: The Zahav (RTGS) System | Bank of Israel

Masav (Bank Settlement Center) - ACH and Faster Payments

Type: Automated Clearing House (ACH) and retail payment settlement system

Primary Function: Acts as the primary subsidiary clearing house for retail interbank shekel transactions

Core Systems:

• Debits, Credits and Transfers System: Electronic system for settling interbank shekel transactions that are not paper-based
• Account debit authorizations processing
• Salary and tax payments settlement
• Interbank fund transfers

Faster Payments in Masav

Type: Rapid retail payment settlement mechanism

Settlement Speed: Funds credited to beneficiary account within 5-7 seconds

Key Characteristics:

• Final and instantly usable funds upon credit
• Primarily used for immediate transfers between individuals
• Expanding to include:
• Merchant payments (future expansion)
• Government receipts and payments (future expansion)

Current Use Cases: P2P (person-to-person) immediate money transfers

Payment System Connectivity

Integration Architecture:

The Zahav RTGS system is connected directly to:

• Paper-Based Clearing House: Processing paper-based transactions
• Masav (Bank Settlement Center): Retail payment settlement
• TASE Clearing Houses: Securities trading clearing and settlement
• Bank of Israel internal systems for monetary policy implementation

Designated Controlled Payment Systems

The Bank of Israel regulates and oversees designated payment systems under its jurisdiction, with oversight ensuring:

• Financial stability and systemic risk management
• Operational resilience and security standards
• Fair access and interoperability
• Consumer protection safeguards

Payment Systems Summary Table

Digital Currency and Innovation Research

The Bank of Israel continues research on:

• Digital Shekel: Central Bank Digital Currency (CBDC) exploration
• Payment Infrastructure Modernization: ISO 20022 compliance and interoperability
• Faster Payments Expansion: Future integration with merchant and government payments

Source: The Zahav (RTGS) System | Bank of Israel, Bank of Israel Payment Systems Overview, Bank of Israel - ISO 20022 Transition

Relationship to Other Regulators

The Bank of Israel (BoI) operates within Israel's broader financial regulatory architecture and maintains relationships with:

Geography and Jurisdiction Notes

Important Departments and Divisions

Key Public Resources

Notes on Naming and Language