'FinMin Does Not Grasp What Central Bank's Role Is'

Bank of Israel makes comment in a press release, the day after the ministry criticized the Bank of Israel bill.

The Finance Ministry doesn't understand "the role of central banks and their independence," stated the Bank of Israel in a press release yesterday, the day after the ministry criticized the Bank of Israel bill earlier this week.

"It is unfortunate that such an important law for the economy, especially now as the economy deals with the ramifications of the economic crisis, is not being endorsed," the bank snarls.

The crux of the dispute is who has the last say on central bank wages. The Finance Ministry insists that it retain supervision over Bank of Israel salaries, through its wages supervisor. But the central bank wants no such thing and charges that the ministry's issue with supervision of wages is "deceptive."

"The proposed Bank of Israel Law contains a mechanism for external supervision of wages within the bank through an expert committee, which will ensure transparency and public auditing of wages," the central bank said. "The current supervisory system failed long ago because it is unable to address the needs of the Bank of Israel as an important government body involved in managing Israel's economy. Unfortunately, the current supervisory system only encourages assaults on the Bank of Israel by the press." The Bank of Israel called on the Finance Ministry to cease and desist its public attacks, and sit down to negotiate the law.

Top Bank of Israel officials deny that the bank opposes external supervision of wages. What it opposes, they claim, is supervision by the Finance Ministry's supervisor of wages. Finance Ministry officials lack a broad view of the Bank of Israel's specific wage needs, they argue.

Contrary to the Finance Ministry's claims, the new Bank of Israel Law doesn't aim to serve the bank and its employees, say central bank officials. Au contraire: estabishing a monetary and administrative councils within the bank, as the new law proposes, would diminish the authority of the governor and top central bank officials.

But all the Finance officials want is to weaken the bank's authority, claim the central bank sources.

The central bank proposes that current wage agreements form the basis for all future wage agreements, and the administrative council to be established within the bank be responsible for any amendment. The council would be comprised of seven people, five of whom including the council chairman would be external appointments chosen by the government.

If the Finance Ministry objects to the council's proposals the matter will be referred to a body of three persons headed by a retired labor tribunal judge, and its two additional members will be public representatives.

A ministry spokesman said that the treasury would be happy to continue coordinated efforts to pass the law, ending 2.5 years of talk. "With all due respect to the Bank of Israel and its role in the Israeli economy, the Finance Ministry insists that transparence and good governance cannot be maintained without uniform and effective supervision over the entire public sector, without exception," its stated.