Bank, Treasury Join Forces to Safeguard Public's Savings

New team will work to reduce the risk of a financial crisis in Israel, maintain stability of the financial system.

The Bank of Israel and the Finance Ministry have for the first time formed a team for maintaining financial stability in Israel, sources close to the capital market said Monday.

According to the sources, the new team will work to reduce the risks of a financial crisis in Israel and to maintain the stability of the financial system in general. For the first time there will be joint systemic planning for all the groups that supervise the capital markets, regarding policy, risk assessment and solutions.

The team, headed by Bank of Israel Governor Stanley Fischer, is expected to maintain the present regulators' independence, and to add a structured framework for joint risk management in the capital market.

Formation of the team is meant to end, at least for now, discussion of whether to merge the regulatory monitoring groups of the capital markets under one umbrella, or to remove supervision of the capital markets from the treasury and transfer it to the Bank of Israel.

The team members from the treasury include acting director general Doron Cohen, accountant general Michal Abadi-Boiangiu and legal counsel Yoel Briss and, from the Bank of Israel, the governor's senior adviser Barry Topf and legal counsel Dita Shamir.

The team also includes the three capital market regulators - David Zaken, supervisor of banks at the Bank of Israel, Oded Sarig, commissioner of capital markets at the treasury, and Shmuel Hauser, chair of the Israel Securities Authority.

Learning from the crisis

The decision to form the team puts Israel among the first countries to draw conclusions from the 2008 financial crisis by increasing the coordination and monitoring of capital markets.

Similar teams have been formed in the past two years in several developed countries, including the United States and Great Britain.

In Israel too several steps have already been taken to coordinate the regulators in the wake of the 2008 crisis, but they were localized and have not been formalized.

The team was formed following assessments at the Bank of Israel and the treasury that proper handling of the capital markets requires fundamental organization.

During the first stage the team members will assemble an aggregate database of financial risks in the market, headed by debt risk, and will formulate methods of operation for crisis situations and routine conduct.

In the past months the regulators have begun to assemble a database, but there has been no real progress in their activity. The new team was asked yesterday to accelerate the steps for establishing the database the three regulators have started.

Yesterday the team held its first session, during which it was agreed that within three weeks the Bank of Israel will submit a work paper that will include models for its activity based on the experience of similar groups worldwide.

At a meeting that will be based on the work paper, they will decide on the powers and tasks of the team, whether it will receive powers through government decision or legislation, and what its structure will be.

The Bank of Israel and the treasury estimate that in the past weeks there has been a decline in the danger of the outbreak of a new worldwide financial crisis toward mid-2012.