aspects of the work of the board of directors : clarifying the role of the board of directors and emphasizing the difference between the functions of the board and those of management ; strengthening the composition of the board, and the independence and professionalism of the outside directors ; raising the level of director ’ s qualifications, and clarifying expectations regarding their functions ; improving the board ’ s working practices. the bank supervision department has drawn up the principles regarding the existence of a main risk management function in banks, and all banks have appointed a chief risks officer. the principles of a proper compensation policy have also been formulated, and changes in this sphere are becoming evident world wide. my third subject is what is known as the shadow banking system. the practical significance of this term is that it deals with aspects of the financial system that the regulators do not know how to supervise. in the us and the uk, and to a lesser extent in europe too, a large part of the credit market is now outside the banking system. in israel the banking system currently covers slightly above 50 percent of total credit, credit from abroad accounts for some 18 percent, so that nonbank credit has increased to more than 30 percent of the total, mainly as a result of the pensions reform and the bachar committee reform. no system of regulation can be perfect, but it is essential that we find a way to supervise nonbank credit. it is no coincidence that many of the companies affected by the crisis belonged to one industry, the real estate industry, and that tells us something. the securities authority is responsible for transparency, but it does not regulate due diligence in new issues. in the final analysis, it is the institutions that manage the public ’ s money that must take the investment decisions. these areas have advanced and improved recently, but we must continue to enhance the quality of supervision over the conduct of these entities, and the quality of corporate governance in companies.

happen to the level of the pension payout at retirement age. the commonly accepted variable to look at in this context is the replacement rate – what will the retiree ’ s income be compared to his pre - retirement salary. in a simulation of the net replacement rates including defined benefit pensions and old - age pensions, we focus first on women with a relatively low income of nis 7500 a month. women who retire at age 62, whose pension savings have generated an average real yield of 2 percent per year, and whose pension contributions are 17. 5 percent of their monthly salary, will have a replacement rate of 54 percent. in contrast, if the yield is 4 percent per year and pension contributions are 19. 5 percent of monthly salary, the replacement rate will be 76 percent. men who retire at age 67 and earn nis 7500 a month at retirement age, whose pension savings have generated an average real yield of 4 percent per year and whose pension contributions are 19. 5 percent, will have a replacement of almost 100 percent. in contrast, if the average real yield is 2 percent and the contributions are 17. 5 percent, the replacement rate will be just 66 percent. the replacement rate will be significantly impacted by both the retirement age and the amount of contributions to savings. this situation, which is similar among those with higher salaries, raises questions on both the individual level and the policy level. these are the issues that the institute being launched now should deal with. i will also present a number of questions, on the individual level, on the policy level, and a number of questions for research : size of the payout : – what is a reasonable replacement rate? – how do we deal with the increase in life expectancy? – how do we deal with the ramifications of the low interest rate environment on the yields of pension savings? – how do we deal with the ramifications of high volatility on the yields of pension savings? – what are far management fees that also allow for the quality management of pension savings? bis central bankers ’ speeches the efficient allocation of public resources : – how do we use and allocate the designated bonds among the various long - term savings plans and instruments in the best possible manner? – what is a fair and efficient allocation of tax benefits? – what is the proper way to handle the population that will be retiring in the next few years without sufficient pension savings? questions relating to the investment portfolio of the institutional investors? – what