Incoming Bank of Israel Chief Vows to Work With Netanyahu, Lapid on Policy Making

Jacob Frenkel says he hesitated to accept the post for another term but is excited to be serving.

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Jacob Frenkel, tapped to take over as Bank of Israel governor when Stanley Fischer steps down next week, has praised Israel's economic performance and promised to cooperate with the government.

Sitting beside Fischer, Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid at a press conference Monday, Frenkel pledged to work with his partners in economic policy making.

"We're sitting here as a team that will not succeed without harmony. It will not be able to operate except by cooperation and mutual understanding," he said. "I'm confident that we have this understanding on goals, and it will be a historic injustice if we don't fully achieve them."

In fact, as governor from 1991 to 2000, Frenkel often had testy relations with Israel's finance ministers. And under Fischer, the central bank has taken new policy initiatives, most notably intervening in the currency markets and striving for the stability of the financial system – things Frenkel has never been identified with.

But on Monday he had nothing but praise for how policy has been conducted in recent years.

"We have a strong economy that overcame many crises – not because we were in the right part of the ocean, but because we practiced responsible economic policy that prevented the storm," he said.

Frenkel said he was talking about responsible fiscal, financial and central bank policy. He praised Fischer for leaving behind a situation that will give him time to become reacquainted with the issues and the central bank itself.

"Our economy has huge potential that can be marketed and therefore must be," Frenkel said. "There are many fantastic things happening here that are being kept a secret – the world doesn't know how wonderful it is."

Frenkel has been busy since last heading the central bank; he has served as chairman of JPMorgan Chase International, vice chairman of insurer American International Group and chairman of Merrill Lynch International. He admits he was hesitant about taking the job a second time around, but did not try to conceal his enthusiasm.

"I'm excited," he said. "I want to express my thanks for the great confidence in recommending me for the post. It's no secret that I hesitated a lot, but it's also no secret that when you have a prime minister who is determined and will accept no other answer than the one he wants, it's hard to stand up to him."

Netanyahu said he chose Frenkel from among many excellent candidates and that he would send the nomination for cabinet approval as soon as possible.

"We decided on Frenkel for the simple reason that he is an excellent candidate, the best among the best," Netanyahu said, adding that Israel needed a central banker who could cope with rapidly changing economic conditions.

He cited Frenkel's backing during Netanyahu's first government when he backed liberalizing the foreign currency market over widespread opposition. "Today we are also in a very fluid and dynamic reality, one that is not always for the better," Netanyahu said. "We need structural changes in the economy and monetary stability."

Lapid called on Frenkel to act as the responsible adult of the Israeli economy. Fischer also strongly backed his successor, although he had been hinting since he announced his resignation in January that he wanted his deputy Karnit Flug to succeed him.

"I have known [Frenkel] since he was a student at the University of Chicago," Fischer said. "I have no doubts about his talents and his ability to be a leader in economics and other areas. He was an extraordinary governor who altered the structure of the financial markets and monetary policy and enabled the governors who followed him to manage the system in ways accepted around the world and with greater efficiency."

Stanley Fischer and his successor Jacob Frenkel in June 2013. Credit: Emil Salman


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