andrew abir : remarks - bank of israel's payment systems conference remarks by mr andrew abir, deputy governor of the bank of israel, at the bank of israel's payment systems conference, tel aviv, 16 november 2022. * * * good morning. i am pleased to be here with you at a conference that will deal with the planning of the new world of payments. it is also important to me to emphasize the extent to which we see the development of an innovative payments system in israel as a strategic goal of the bank of israel. the central bank's money stands at the center of each country's payments system, and that is what forms the foundation of the public's trust in the system. there are currently two types of central bank currency. the first is one you are all familiar with cash. historically, trust in the banking system was based on the public's understanding that it could always withdraw money from its accounts at a commercial bank and ask for central bank currency. normally, no one even thinks about this. but it becomes relevant for many people during emergencies. we make sure to routinely maintain an efficient cash distribution system, embed advanced security features so that it will be very difficult to impossible to counterfeit banknotes, and maintain the public's trust in cash. but technology is changing, and in view of the decline in the use of cash, we are considering the launch of a central bank digital currency so that even in the digital era, central bank currency will remain at the center of the retail payments system. the second type of central bank money is in the wholesale system - the banking system's accounts with the bank of israel. these accounts also increase the public's trust in the banking system. we have seen during crises that banks may prefer increasing their balances at the central bank to enable them to pay each other with central bank currency. what essentially connects wholesale money with the retail payments system is the local rtgs system, called zahav. and just like it is important to use to increase the efficiency and dependability of the cash supply system, it is also important to use to ensure the efficiency, dependability, innovation, and readiness for the future of this system. zahav is a national network for all financial transactions in the economy. its stability and availability is a precondition for management of an advanced economy, and the basis for conducting monetary policy. therefore, rtgs systems around the world are managed by the

overall, the euro area is well protected against all of these risks thanks to the robustness of its institutional framework price stability is unambiguously the priority objective of monetary policy monetary financing of governments is strictly prohibited the eurosystem ( the ecb and national central banks ) is extremely well capitalised, which protects its independence. this has allowed the eurosystem to implement nonstandard measures on a large scale without endangering its credibility. of course, we do not control fiscal policy. we will never accept a situation where fiscal imbalances could constrain monetary policy. it is very important, therefore, that credible fiscal consolidation takes place across the euro area. this will make it easier for the eurosystem to be active in protecting financial stability. on the contrary, doubts over governments ’ resolve to ensure the sustainability of public finances would make us powerless to fight instability and expose the euro area to great dangers. now for the more normative aspects. we may have to live with nonstandard measures for a long time. indeed, some central banks have adopted interest rate guidance announcements covering the next two years. it is likely that monetary policy will, for some time, make use of a diversity of instruments. macro - prudential measures will interact with monetary policies in a complex way. in that context, it is therefore all the more important to keep clarity of purpose and stick to two crucial features inherited from the pre - crisis consensus : the focus on price stability and, its corollary, central bank independence. there should be no ambiguity about what central banks are trying to achieve. the more non - conventional their actions, the less obscurity there should be as to their ultimate purpose. non - conventional measures, like any others, can only achieve their objectives if inflation expectations are solidly and clearly anchored. from that point of view, calls by some economists and market participants for a temporary relaxation of price stability objectives bis central bankers ’ speeches are, in my view, totally misguided. i find it significant, on the contrary, that two major central banks have recently decided to quantify their price stability objectives and enhance their communication accordingly. bis central bankers ’ speeches