Bank of Israel unveils wage control plan

The proposal is for an administrative board to review pay at the central bank.

The supervision mechanisms proposed by the Bank of Israel in the draft of the new Bank of Israel law has been unveiled. According to the draft, management ans supervision of salaries will be transferred to an "administrative board" (the Bank of Israel's board of directors), on which five of the seven members are external representatives, including the chairman of the board.

Each year the new board will make a full report on the Bank of Israel's annual plan, targets, budget and salaries. The report will be available to the Knesset, government, Ministry of Finance and the public. The agreement signed between the Bank of Israel and the Ministry of Finance will serve as the basis for determining the salaries of the bank's employees. In addition, a simple mechanism will be agreed to fix the maximum rate of change of salaries from year to year - a salary ceiling - and if there are claims that a salary is excessive for whatever reason from the Knesset, government or Ministry of Finance, then it will be discussed by the new board. If the board finds the claim justified, it will alter the decision and implement the change. If required, the government will set up an ad-hoc committee of three experts who will rule on the dispute. The experts will be chosen by the government (not the Ministry of Finance or Bank of Israel). It should be noted that this proposal is not accepted by the Ministry of Finance.

Meanwhile, the war is heating up between the Bank of Israel and the Ministry of Finance regarding supervision of salaries at the bank. Head of a senior department at the Bank of Israel Gabi Fishman told Army Radio that, "Every third grade child knows that it is impossible to both supervise and be independent."

He added, "Nowehere in the world does the Ministry of Finance supervise the central bank - because of tension between the two institutions. That is the structure of practical economic policy in almost every country. It is not a matter of not expressing confidence, The present supervision is probably incorrect for it is a fact that what has happened has happened. We are proposing a body of people that the State appointed. The public will be better informed than happens today."

Ministry of Finance director of wages Ilan Levin is not committed to the proposal and said, "We will not forego our right to supervise the institution that pays the highest salaries in the public sector. The Bank of Israel will be like every other important corporation in Israel and it is one of many."

According to Levin the wages division and the State Comptroller found large exceptions in the Bank of Israel, such as receipt of personal car expenses, while at the same time the employee had a bank car, and the making up of imaginary salary ranks, and these measure cost the economy millions of shekels. Senior sources in the Bank of Israel informed "Globes" today that the war broke out between the Ministry of Finance and the Bank of Israel in order to demonize Stanley Fischer and restrict the options of Prime Minister Benjamin Netanyahu, who has retreated over the clauses already agreed."

Published by Globes [online], Israel business news - www.globes-online.com - on June 11, 2009

© Copyright of Globes Publisher Itonut (1983) Ltd. 2009

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