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The Bank of Israel and the Finance Ministry are set to sign an agreement requiring the central bank's top brass to return illegal wages received since 1998.

The parties have already agreed that the irregular wages will be repaid. Most of the officials in question have resigned from the bank, while a few continue to serve on the bank's senior management.

The negotiations are being led by treasury wages and labor relations supervisor Ilan Levin, and Bank of Israel Director General Hezi Kalo. Details of the negotiations are being kept secret due to the sensitivity.

The parties are seeking to reach a mutually agreed upon definition of irregular pay. Beyond illegal salaries, they have also discussed the senior management's benefits, including company cars and regular travel expenses.

The Finance Ministry and the Bank of Israel said employees required to return money will be given a chance to respond at a hearing at the Finance Ministry.

The illegal wages have been a central bone of contention between the central bank and the treasury for years. Former wages supervisor Yuval Rachlevsky was the first to raise the issue. The central bank initially rejected outright the Finance Ministry's demand that it return the excess pay and refused to discuss the matter, jeopardizing all subsequent attempts to negotiate a new wage agreement for central bank employees.

Former Bank of Israel governor David Klein and former human resources head Efraim Gross are said to be among the persons likely to be required to return illegal salaries and benefits. Sources say some former and current officials may be required to pay back hundreds of thousands of shekels.

Central Bank Governor Stanley Fischer in principle accepted the treasury's demand that the money be repaid, but demanded that the period be limited to 2004 and later. The disagreement was solved through mediation led by Jerusalem Labor Tribunal Judge Eyal Avrahami. In 2008 Avrahami ruled on the final six issues in dispute, and specified guidelines for repayment.

Negotiations between the Bank of Israel and the Finance Ministry are being conducted based on these guidelines.

Avrahami's mediation, and the end of the wage dispute, enabled the Bank of Israel and Finance Ministry to reach a new wage agreement, which has been in force for about a year. The agreement contains two wage tracks - one for older employees, and another for new employees.