in raising short - and long - term capital, whether on a one - off basis or in the framework of investment funds ; the management of asset and liabilities portfolios for individuals or firms, and intermediation in the capital marketall of them outside the banking system. in order to create significant nonbanking intermediation it is necessary to return to the problem of the current concentration of the financial services, and introduce the measures we have mentioned on various occasions for dispersing the foci of financial power in israel's economy. because of the process of globalization that israel is currently undergoing, this involves building cooperation with international financial institutions rather than reducing the existing size of commercial banks. why would this make monetary policy more efficient? because the aim of monetary policy is to influence the public's economic decisions. the existence of developed nonbank financial intermediation enables the interest rate to have a direct effect, not only via the banks, on the behavior of savers and borrowers. a better balance between banking and nonbanking intermediation also improves management by the business sector, because the public, which provides firms with capital sources via the capital market, has long - term considerations, while the banks, which provide firms with loans, have short - term ones. the combined outcome is that monetary policy is provided with another channel of influence, which could produce more rapid results than in a situation where it operates solely via the banking channel. this promotes lower fluctuations in the interest rate and greater stability in the financial markets. this stability is one of the major preconditions for sustainable economic growth. conclusion opening the financial markets is necessary for the benefit of both the individual and the business sector, not only because of the advantages ensuing from a more competitive market. this policy also enables more efficient use to be made of policy instruments, and everyone benefits from that. note in this context that the process of the structural change of the financial markets, only part of which has been mentioned here, has come to an almost complete halt. the reasons for this should be examined, the necessary conclusions drawn, and steps taken to return to the implementation of the changes required for a modern country that wishes to integrate in the global economy.

karnit flug : establishing a financial stability committee in israel remarks by dr karnit flug, governor of the bank of israel, at the knesset finance committee meeting on the bill to establish a financial stability committee, jerusalem, 16 may 2017. * * * i am pleased to participate in the first discussion in the knesset finance committee on the issue of establishing a financial stability committee. about 5 years ago, the international monetary fund recommended that israel establish a financial stability committee. it took us some time, but i am happy that the government, the financial regulators and the bank of israel have all reached agreements regarding the composition, aims and authorities of the committee — those that are before you, the members of the knesset, in the text of this bill. both in israel and around the world, the main motivation for establishing a financial stability committee was the understanding that cooperation, the transfer of information and coordination between the various financial regulators, the ministry of finance and the central bank, are required in order to identify and monitor systemic risks and deal with them in a timely manner so that they don ’ t become risks to the financial stability of the economy. we must remember that impaired financial stability has long - term implications for employment, growth, and general well - being. the world experienced this during the global financial crisis of 2008, and one of the main lessons learned was the necessity of institutionalizing cooperation and coordination between all the financial authorities in the country within a central body. accordingly, many of the advanced economies have established financial stability committees. such cooperation and coordination is also important due to the changes expected in the financial system in israel, both the reforms to increase competition and the rapid technological changes that are enabling the entry of new entities into the financial system. these changes, alongside the advantages they bring with them, are naturally expected to increase the existing risks and to create new ones, both due to the increase in activity and the changes in its components, and due to the close interfaces of the new entities with the financial system. maintaining a stable financial system is the responsibility of the government, the bank of israel, and the other regulators. the financial stability committee will make it possible to fulfill this responsibility. however, we must remember that the financial stability committee ’ s responsibility is preventive, and that the operative responsibility essentially remains that of the financial regulators or, in the case of a financial crisis, the government. the committee will enable the regular tracking and monitoring of the financial system and provide recommendations to the financial