fsa the framework of rules applied to insurance supervision is unique to the industry. it is true that in the run - up to the start of the crisis, and for some time thereafter, the fsa mingled insurance and bank supervision in terms of its operating units, but i think that did not work effectively and we have moved to a clear distinction with an insurance supervision directorate headed by julian adams. insurance supervision is a skill of its own, and while our supervisors do move roles between insurance and banking in both directions, we want to ensure that we have groups of truly expert insurance and banking supervisors. the reason for locating insurance and banking in the pra is in my view that we have learned during the crisis that our job as prudential supervisors is to ensure that the public and users of financial services, including the corporate sector, can be assured of continuous access to the critical services on which they depend. many financial services may be regarded as critical by their users, but some are distinctive because it is hard for consumers to replace their provider with a substitute without accepting unacceptable cost and loss. insurers provide critical services to the public in terms of risk transfer and very long - lived savings contracts. this last point draws out that insurance is not a single homogenous industry – general and life insurance are very different activities – and we recognise that in our supervision. it would be unacceptable to the public to have access to risk transfer through, say home or car insurance, or professional indemnity insurance, to name but a few, withdrawn in a disruptive and unannounced way. in the same way, savings contracts that are long - lived and provided by life insurers, and are often an individual ’ s primary pension provision, are critical financial services that are difficult to replace without unacceptable cost. for me, there is therefore a common feature of banking and insurance in terms of continuity of access to critical financial services. this is not, however, the end of the story on the issue of why the pra will regulate banks and insurers. what i have started to describe is the first objective that the new legislation gives to the pra, namely the safety and soundness of the firms we will supervise. but there is another important leg to the definition of the objective, namely that the underlying objective of our pursuit of safety and soundness is the stability of the financial system. for banks, this had led us to emphasise that we will be a proportionate supervisor, putting

karnit flug : israel ’ s challenge to fulfil its economic growth potential main points of remarks by dr karnit flug, incoming governor of the bank of israel, at the prime minister ’ s conference “ partnership and growth ”, tel aviv, 29 october 2013. * * * when i decided, several weeks ago, to accept the invitation to participate in this conference, i did not know that it would be my first lecture following my appointment as governor of the bank of israel. nonetheless, i am very happy that the hand of fate has led to my speaking here today, two days after the government ’ s decision to appoint me as governor, and economic advisor to the government, because i believe that this conference deals with one of the most important issues on the socioeconomic agenda in the state of israel. the topic of the conference – the arab sector ’ s partnership in the economy and in growth – is a major issue in terms of the israeli economy ’ s ability to fulfill its growth potential in the next few years and to reduce the scope of poverty and the gaps in israeli society, which are among the highest in the oecd, and about which much has already been written and said. the successful integration of the arab public into the labor market in particular, and into the economy in general, is a very important, even essential, component of the israeli economy ’ s ability to continue to grow, and to support a higher standard of living for all israelis. this conference, which deals with various aspects of the impediments to the successful integration of the arab population in the labor market, is therefore particularly important. i will begin with a few words about the recent state of the economy : from the macroeconomic standpoint of growth rates, the economy is in good shape, particularly compared to other developed countries. in the past decade, the economy has enjoyed significantly higher growth rates than most other advanced economies, and the global financial crisis, which was reflected in a deep and sometimes prolonged recession in many economies, was weathered by the israeli economy with relatively minor damage. unemployment, which jumped in many economies during the crisis and remains very high in most of them, increased relatively moderately in israel, and resumed its decline immediately following the crisis, so that we are currently at historically low unemployment levels. the labor force participation rate, and in turn the employment rate, are increasing on a consistent basis, among other things as a result of the continuing entry to the labor market of arabs