| The Bank of Israel's work plan for 2010 and the budget derived from it are presented below, with a description of the Bank's functions, its objectives for the coming year as decided by management, and further details regarding the major comprehensive projects for 2010. |
| 1. THE BANK'S FUNCTIONS AND OBJECTIVES FOR 2010 |
| In the framework of the work plan for 2010 the Bank will act to fulfill its functions and to carry out the objectives for the year as defined by management. |
| The Bank’s functions as specified in the new Bank of Israel Law |
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To direct monetary policy |
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To supervise and regulate the banking system |
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To manage Israel’s foreign reserves |
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To support the proper functioning of the foreign currency market |
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To advise the government on economic matters |
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To regulate the payment and settlement systems |
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To issue currency and regulate the cash system in the economy |
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To serve as the government’s banker |
| The Bank’s objectives in 2010 as defined by management |
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To prepare for the implementation of the new Bank of Israel Law |
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To draw conclusions from the latest global crisis so as to improve the economy's performance |
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To improve inflation forecasting and to continue the development of models to help the monetary policy decision-making process |
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To adopt and implement best practices in bank supervision and in the banking system |
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To integrate into international economic institutions and the global financial system |
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To upgrade Israel's financial statistics |
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To monitor and carry out research into financial, including macrofinancial, stability |
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To widen the research infrastructure as a basis for formulating proposals for economic policy |
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To instill the Bank's organizational culture and code of ethics |
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To improve the Bank's systems and processes |
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To manage the Bank's risks |
| Preparations for the implementation of the new Bank of Israel Law |
| To prepare for the implementation of the new Bank of Israel Law the various departments in the Bank will have to carry out the following assignments: |
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Draw up proposals for a decision-making process for the interest rate and for other core issues; |
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Draw up plans for the establishment of a secretariat to help the Monetary Committee and Administrative Council that will be set up, to provide administrative assistance to the members appointed to the Committee and the Council, and to prepare rules regarding various subjects. |
| Drawing conclusions from the crisis so as to improve the economy's performance |
| To strengthen the economy's resilience to shocks it is important to learn lessons from the experience gained during the latest crisis. To that end the Bank will engage in documentation and analysis and will draw conclusions from the crisis in the areas of oversight of markets and financial institutions, macroeconomic policy, and the use of specific tools during the crisis. This, based on experience gained internationally and in Israel. |
| Improving inflation forecasting and continuing the development of models to help the monetary policy decision-making process |
| To enhance the quality of the analysis that underlies monetary policy, the Bank, like leading central banks around the world, will continue to develop econometric models for forecasting inflation and policy analysis similar to the cutting-edge professional models in the field, and will improve the way their results are integrated into the assessment of the situation, on which the decisions are based. |
| Adoption and implementation of best practices in bank supervision and in the banking system |
| Following the adoption of the principles of Basel 2 in Israel, the Bank will undertake a structured process of assessing risk management and capital adequacy in the banking corporations (Internal Capital Adequacy Assessment Process (ICAAP) and Supervisory Review and Evaluation Process (SREP)); changes will be made in the directives in the Proper Conduct of Banking Business to bring them into line with the up-to-date guidelines of the leading regulatory bodies; and the process of bringing the Guidelines for Preparing Reports to the Public into line with the rules of the International Financial Reporting Standards (IFRS) will start. |
| Integrating into international economic institutions and the global financial system |
| The various departments will continue with their activity related to the implementation of international standards in their work and the completion of the process of Israel's becoming a member of the OECD. |
| Upgrading Israel's financial statistics |
| The Bank's Information and Statistics Department, in cooperation with other departments in the Bank and the Central Bureau of Statistics, will act to expand and upgrade Israel's financial statistics in accordance with the professional standards adopted by the international financial institutions. The Department will act to meet the requirements for reporting to international financial institutions, including the IMF and the OECD. |
| Monitoring and carrying out research into financial, including macrofinancial, stability |
| Research into systemic financial stability will be expanded and undertaken cooperatively by the Research, Market Operations, Banking Supervision, and Information and Statistics Departments, with the purpose of formulating policy recommendations to improve financial stability in Israel. Financial stability will be monitored on an ongoing basis, and recommendations made regarding policy to reduce risks and to help in handling various types of crisis. |
| Widening the research infrastructure as a basis for formulating proposals for economic policy |
| Research will be undertaken in a variety of spheres (e.g., in the area of fiscal policy––expenditure and taxes, the labor market, the principal industries, infrastructures, education, etc.), to examine the effects of various policy tools on performance, as a basis for assessing policy and formulating recommendations to operate various instruments to achieve the targets set. |
| Instilling the Bank's organizational culture and code of ethics |
| In 2009 the preparation of the Bank's code of ethics and its organizational values was completed. In 2010 the Bank will engage in instilling them. It will arrange a conference and undertake other activities to present and instill the values to all staff. |
| Improving the Bank's systems and processes |
| The Bank's systems and processes will be improved and upgraded, thus streamlining its activities, reducing risks involved in the processes, and cutting costs. The following steps will be taken to achieve this objective: |
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Integration of a computerized system for managing the foreign exchange reserves—the Integrated Treasury Management System (ITMS) (Hebrew acronym, BIZI). |
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Integration of an integrated computer system for the Bank's organizational, administrative and internal systems (the SAP Enterprise Resource Planning (ERP) system), which will include, among other things, an examination of the purchasing system, with the aim of speeding up the process. |
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Establishment of a central data warehouse for the Bank of Israel and improving access to it. |
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Upgrade of the Bank's internet website, which presents the Bank's activities and teaches the public efficient financial consumerism. |
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Replacing the machines for counting and sorting banknotes. |
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Planning a new computer system for banking supervision. |
| Managing the Bank's risks |
| The various departments in the Bank will act to minimize exposure to the risks described in the review of risks carried out in the Bank and completed in 2009, and will participate actively in managing the risks that the Bank is exposed to in its activities. |
| 2. THE BANK’S MAIN PROJECTS IN 2010 |
| Some of the major projects the Bank plans to implement in 2010 are described below. |
| A computerized system for managing the foreign reserves––Integrated Treasury Management System (ITMS) |
| This is a multi-year project of installing a new computerized system for managing the foreign exchange reserves and the Bank's activities in the domestic market. The new system, that of Wall Street Systems (WSS), will replace a number of the current systems, and will support the implementation of all stages of the process, including functions that support investment-related activities (such as recording transactions, message creation, management of market risks, accounting development, cash flow management and reconciliation of nostro accounts). Installation of the system started in 2009, and will be completed at the beginning of 2011. |
| Installation of an integrated computer system for the organizational, management and internal systems of the Bank (Enterprise Resource Planning, ERP) |
| In 2010–12 the ERP system of the SAP business software company will be installed in the Bank, and it will replace many of the old systems currently operating in the Bank, and will provide solutions in various areas in which currently there are no systems being used. The areas that will benefit are human resources, finance and logistics. The ERP will link all internal management functions with a joint database that offers capabilities of managerial tools, portal tools and an alignment for management reporting based on internal data storage incorporated in the Bank. |
| Bank of Israel central data warehouse (DWH) |
| This project is the construction of a data warehouse that will incorporate all the economic information managed by the Bank. The advantages of a DWH are: (a) it will include comprehensive and coherent information on Israel's economy; (b) it will make up-to-date information available for decision makers and for the public (c) it will support the core economic departments of the Bank by providing rapid, uniform access to information required to enable them to fulfill their functions, on a supportive and convenient interface; (d) it will create a clear and uniform "single version of the truth." |
| Upgrade of the Bank's website |
| The project consists of upgrading the Bank's website, including a reorganization of the content, making use of advanced tools for dealing with the search for and presentation of information. The portal will help the target population, i.e., the general public and professional groups, to find and access the relevant information they seek. |
| Purchase of a switchboard |
| The old telephone switchboard that has functioned in the Bank for more than 28 years and that is subject to many failures will be replaced by a new one that will satisfy advanced communications needs. |
| Currency-related projects |
| Banknote counting machines: The Currency Department is engaged in upgrading its banknote counting and sorting capability by replacing the machines in its possession with machines based on the most advanced technology available. Two new machines have been purchased, and these will be integrated into the Department in the first quarter of 2010. |
| Issue of a new banknote series: In accordance with a decision of the Bank's management, the Currency Department is engaged in the process of issuing a new series of banknotes, which it is planned to release into circulation within three years. Planning a new series incorporates many aspects, including the design, the raw material (i.e., the substrate––paper or polymer) and new security features. In 2010 this activity will focus on the design of the new series. |
| 3. The Bank of Israel’s budget of expenditure and investments |
| The Bank’s budget is derived from the targets of the work plan and the objectives set by the Bank’s management, as described above. |
| The Bank's current expenditure budget for 2010 is about NIS 624 million, compared with the original budget of about NIS 633 million in 2009, and the updated budget of NIS 602 million. |
| The Bank’s investment budget for 2010 is NIS 52 million, compared with NIS 43 million in the original 2009 budget (updated to NIS 66 million). The main items are the purchase of new machinery for the Bank’s currency activities, IT projects, including establishing databases, installing the ITMS system for managing the foreign exchange reserves, and installing the ERP system for managing the Bank’s operational and organizational systems. |
| As in every year, in 2010 the Bank expects income from the issue of currency (seigniorage), from managing the foreign exchange reserves, and from its activities related to managing liquidity in the economy. These are shown in the Bank's financial statements. |
| In addition, a budget for liabilities totaling NIS 99 million in 2010 was authorized, intended mainly for the printing of banknotes and the IT and construction projects. |
