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

karnit flug : increasing competition in the financial system to benefit the israeli economy remarks by dr karnit flug, governor of the bank of israel, at the presentation of the strum committee report to the minister of finance and to the governor, tel aviv, 14 december 2015. * * * i would like to thank the committee ’ s members and its chairperson for their comprehensive and professional work in recent months. the bank of israel sees extreme importance in increasing competition in the banking system in particular and in the financial system in general, and toward that end is promoting a series of processes, some in collaboration with the other regulators, in addition to the recommendations discussed here today : • establishing a credit data register, which will reduce information asymmetries between banks and nonbank credit providers and will provide the customer with negotiating power ; • promoting a securitization market, which will allow an increase in the sources of credit and provide a bridge between the capital held by institutional investors and the credit needs of the economy ; • extended implementation of the vast majority of recommendations by the zaken committee to promote competition. the bank of israel supports every process that serves the public, and takes this principle into account in every decision it reaches. therefore, the issues must be examined from a long term perspective, and processes whose negative impact is greater than their benefit and that are liable to pose a risk to the economy should be avoided. we will thus ensure that the reform will bring about the intended changes. there is broad agreement on the need to strengthen the competition in the credit market ’ s household and small businesses segment, and to make it easier for new participants to compete in the merchant acquiring and payment services sector as well. the committee proposes ways to increase the number of participants, to create conditions that will increase competition between participants, to increase the sources available to them, and to ease the connection to the payment and settlement systems. during the formulation of these processes, there is utmost importance to ensuring the protection of financial services consumers, and the stability of new entities, which of course impacts on the stability of the entire system. we must not forget the lessons of the most severe financial crisis in our generation, which was caused by irresponsible measures and inadequate supervision. it is important to remember that in the past three years the balance of consumer credit has increased cumulatively by about 20 percent, and credit to small businesses by about 30 percent. as noted, the report contains very significant steps, which will