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This week, the Bank of Israel published its first report on financial stability. The report's bottom line is that the Israeli financial system's financial stability improved last year over 2002. This is something we already knew.

The bank also repeated another well-known fact: The two large banks' dominance of the Israeli financial markets harms the development of the markets and even endangers the banks' own stability.

The Bank of Israel states that the banks' provident funds have amassed unpaid commitments of NIS 189 billion, half of which is liquid and available for immediate redemption. Therefore, there is a danger of a financial crisis if the public withdraws billions at the same time, whether as the result of negative yields or fraud at a large fund.

This last scare attempt reminds me of the enormous fear campaign of a few years ago, called the "collapse of the shekel mountain." This phrase was coined in the mid-1990s by Zipi Gal-Yam and Vered Dar of the Finance Ministry's economics department, as part of then-finance minister Avraham Shohat's struggle against the interest rate policy of Jacob Frenkel, then the governor of the Bank of Israel, when Frenkel was trying to eradicate inflation.

At the time, treasury officials spread the story that the high interest rates were causing the creation of a huge "shekel mountain" that was rising higher and higher, and one day - when the shekel interest rate dropped - the public would throw away its shekels and convert tens of billions of shekels to dollars all at once. And then a frightening depreciation of the shekel would occur, which would lead to incredible inflation, and a catastrophic financial collapse. No less a story, believe it or not.

Many journalists adopted the story, and carried on about the "shekel mountain" twice a week. But amazingly, even though interest rates are at a low that we didn't even dream about 10 years ago, the "shekel mountain" has remained stable. Today there are NIS 280 billion in the mountain - made up of cash, bank accounts and bank deposits. The public receives only a pittance in interest on this money, but still does not withdraw the hundreds of billions all at once.

The public didn't do this even during the period of the great crisis of June 2002, and not during the period of terror attacks.

It is true that there were times when shekels were converted to dollars and caused a mild depreciation; and it is true that shekels have moved into the stock market and caused stock prices to rise; and it is even possible that one day these shekels will switch to real estate investments. But all these processes are normal moves from one investment sector to another.

Therefore, the new scares from the Bank of Israel are also baseless. Those who withdrew their savings from the provident funds mostly invested in savings plans in the same banks. The public also did not empty the funds even when they produced negative returns over a long period.

A financial crisis will not happen because of a drop in returns or a large embezzlement. We can survive those. But the crisis may happen because of an irresponsible economic policy from the government or the Bank of Israel.