The Saga Continues? |

Netanyahu Expected to Reach Decision on New Central Bank Governor Within 2 Weeks

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Prime Minister Benjamin Netanyahu will have to make a decision soon on a replacement for Bank of Israel Governor Stanley Fischer, who left office in June, and there are indications that the prime minister may look beyond the three leading candidates as his choice for the job.

The current thinking in Jerusalem is that Netanyahu will make his decision within two weeks. The prime minister has been preoccupied with matters related to defense and the international arena, in advance of his scheduled departure early this morning for the United States. He will be addressing the United Nations General Assembly and meeting with U.S. President Barack Obama.

After a series of aborted attempts to find a replacement for Fischer, the candidates now under consideration are former Argentinian central bank governor Mario Blejer; former Bank of Israel deputy governor Zvi Eckstein; and Victor Medina, a veteran Bank of Israel and Finance Ministry official.

Although not officially confirmed, there are widespread indications that Netanyahu is not satisfied with the three candidates currently in the running, meaning he might seek someone else entirely as governor. The decision also requires the input of Finance Minister Yair Lapid.

Fischer notified Netanyahu of his intention to resign on January 29. Since June, Fischer's deputy, Karnit Flug, has been acting governor.

Former Bank of Israel Governor Jacob Frenkel, who was under consideration to return to his former job, dropped out of the running after questions were raised regarding an incident at Hong Kong airport in which he was suspected of shoplifting. He denied any wrongdoing and attributed the matter to a misunderstanding. Economist Leo Leiderman was then nominated, but he too withdrew his candidacy.

Whoever ultimately takes the job is expected to have a full agenda, including senior staff appointments and decision making on monetary policy. The new bank governor will also have to find a replacement for Deputy Governor Flug, who was passed over as Fischer's replacement by Netanyahu and subsequently announced her intention to leave the Bank of Israel.

The comings and goings at the bank will also affect the composition of the monetary committee, which determines all of the central bank’s economic policies. In addition to the governor, the Bank of Israel’s representatives on the committee consist of the deputy governor and one other nominee. That third person is currently Barry Topf, who has announced his intention to leave the bank at year’s end. He is expected to be replaced by Nathan Sussman, the head of the Bank of Israel's research department. There are three other members of the monetary committee, but they are external representatives.

The wealth of issues on the new governor's desk is not expected to provide the proverbial 100 days of grace that new officeholders often get. Among other matters that will have to be addressed quickly are policy on a whole host of fields, including interest rate decisions, foreign exchange policy, banking industry oversight and policy on economic growth and unemployment.

Stanley Fischer at the Knesset Finance Committee on June 3, 2013.Credit: Emil Salman

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