the twin peaks model. this model separates the two functions of financial supervision : i. supervision of financial institutions ’ risk management ( prudential supervision ) ; ii. supervision of conduct of business, covering such subjects as transparency and full disclosure by institutions, fair relations between them and their customers, and consumer protection. in the netherlands, the supervision of financial institutions ’ risk management is the responsibility of the central bank, while supervision of business conduct is performed by a separate authority. another model is the irish one, where the central bank supervises both financial institutions ’ risk management and their business conduct. in australia, in contrast, the central bank is not responsible for either supervision of risk management by financial institutions or their business conduct. if the bank of israel is given the responsibility for the supervision of financial institutions, it would be advisable to adopt the functional supervision approach, in other words, to separate the two supervisory functions – the supervision of financial institutions ’ risk management and the supervision of their business conduct. later, after some years ’ experience, the situation can be reviewed, and the question considered of whether supervision of business conduct should be transferred from the bank of israel to a new authority that would be established specifically for that purpose. to conclude : financial supervision is one of the most important issues affecting the functioning and development of the financial markets and the economy as a whole. in israel the issue assumed even greater import with the implementation of the recommendations of the bachar committee, and at this time it has come to the fore again in light of the implications of the global financial crisis. after examining the question very closely, and taking into consideration the conclusions being drawn in the major financial institutions around the world, we recommend that the supervision of banks be merged with the supervision of insurance, provident funds and pension funds, within the bank of israel. it is advisable to switch then to the functional supervision approach, i. e., to distinguish between the supervision of risk management in financial institutions and supervision of their business conduct. at a later stage, after some years, we can examine the question of whether the supervision of business conduct should be transferred from the bank of israel to another authority.

yaron amir : remarks - eli hurvitz conference on economy and society 2020 remarks by mr yaron amir, governor of the bank of israel, at the eli hurvitz conference on economy and society 2020, virtual, 14 december 2020. * * * hello to all those watching the conference — i am pleased to be here today taking part in this important professional discussion, which the eli hurvitz conference provides each year. the past year was characterized by a health crisis that led to an economic crisis of historic proportions, one that crossed borders and continents. the lockdowns imposed in response to the broad outbreak of infection led to a sharp decline in economic activity. we are pleased that the recovery from the second lockdown has been more rapid than the recovery from the first one, and thus it may be concluded that it is important to continue and open the economy and to maximize economic activity, but in a responsible manner. the crisis also caused a strong negative impact on the labor market — an impact that included all population levels and geographic areas. the government ’ s role in the handling of and exit from the crisis is extensive and incredibly important, and hence there is great importance to the 2021 budget, which is the economic work plan of the government. i will expand on the importance further on in my remarks. monetary policy has also had an important role in the crisis so far, and through it the bank of israel worked in a range of ways to minimize as much as possible the negative impact on israel ’ s economy, and we are working all the time on steps and programs that will lead the economy back to a path of growth, employment and productivity, through utilizing the opportunities inherent in the crisis. i will begin with a short survey of the israeli economy as it headed into the crisis. it should be recalled that israel entered the crisis in a relatively good state : solid growth, a tight labor market, a current account surplus, and a debt to gdp ratio that had declined to approximately 60 percent, due as well to the responsible budgetary conduct by israeli governments in most years — a fact i ’ ve defined in the past as a strategic asset. israel was adversely impacted by the crisis relatively less than other economies worldwide. the outbreak of the crisis and the imposing of limitations led to a negative economic impact, but compared internationally the adverse impact to gdp was lower. the data throughout the summer were better than we had thought, and show that there should be a continuation of a policy to