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Banker of the Government and the Banks
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The Bank of Israel Law designates the Bank as the sole banker and fiscal
agent of the Government. In this connection, the Bank of Israel operates in
three areas:
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The State Loans Administration administers the government's domestic loans,
whether non-compulsory (negotiable or non-negotiable) or compulsory. The
Administration is also responsible for the redemption in Israel of foreign loans
(State of Israel Bonds).
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The Administration keeps a record of receipts from the sales of bonds and
payments to bond and securities holders, maintains the register of holders of
non-negotiable State loans and securities traded on the Stock Exchange, and
in this regard acts as the coordinating bank for government bonds.
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The Administration handles securities deposits on behalf of the government;
these include the shares, options, and convertible bonds of privatized
government corporations, as well as deposits from insurance companies.
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The State Loans Administration initiates as necessary changes in legislation
concerning loans, and serves as advisor and coordinator for the government
and the Knesset in all matters relating to these laws.
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The Administration formulates and publishes directives regarding repayment
of the loans, and also determines and calculates the amount of repayment of
principal and interest.
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The availability of the data bases of the compulsory loans enables the
Administration to carry out transfers of loan certificates and repay loans to
registered holders who have lost their certificates, in accordance with the law.
The Administration also undertakes activities to trace and identify loan
holders who have not yet been repaid, and advises them of the possibility of
receiving repayment. The public can obtain detailed up-to-date information on
all aspects of these loans from the Bank of Israel in Jerusalem and Tel Aviv,
and may redeem certificates there (certificates may also be redeemed at the
branches of the commercial banks and the Post Office Bank).
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Banker of the government: the Bank of Israel provides normal banking
services for the government-making and receiving payments, managing the
government's domestic loans, and handling some of its financial activities
abroad.
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The government deposits its receipts-in both local and foreign currency-with
the Bank of Israel, and draws on them as required. The Office of the
Comptroller of the Bank handles the governments receipts and makes
payments for it via electronic means, checks, and written instructions,
manages the government's accounts in accordance with its needs and
requests, and deals with the stock of post-dated checks deposited by the
government (mainly from the tax divisions), etc.
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As the government's fiscal agent, the Bank of Israel raises money from the
public for the medium and long term, to finance the government's deficit and
to refinance the domestic debt. As mentioned above, this function is
performed by the State Loans Administration which administers a large part of
the government's domestic debt.
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The Foreign Currency Department of the Bank of Israel provides banking
services for government ministries in handling payments and receipts abroad,
including activities related to the government's imports and exports. This
involves dealing with the documentation relating to transactions and
implementing the necessary financial transfers.
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Banker of the banks: the banks deposit money with the Bank of Israel, in both
local and foreign currency, in various types of deposits; some by dint of the
reserve requirements and some deposits of surplus cash made at the banks'
own initiative-interest-bearing fixed-term deposits in local or foreign currency.
The current accounts which the banks maintain with the Bank of Israel also
serve for interbank transfers. The Bank of Israel also makes credit available
to the banks, mainly via discount-window loans.
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The banks' local-currency clearing house, in which the representatives of the
different banks exchange checks and other items, operates in Tel Aviv, close
to the commercial banking center, under the management of the State Loans
Administration. The clearing house acts under the supervision of the Clearing
House Committee, which is appointed by the Governor of the Bank of Israel,
and whose members include representatives of the Bank of Israel and the
commercial banks. The financial outcome of clearing activities are reflected in
the banks' current accounts in the Bank of Israel.
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About the Bank of Israel