“There was no need to distribute grants to everyone”. A first interview with the new Bank of Israel Director General Shulamit Geri enters the post of Director General of the Bank of Israel – one of the country’s most conservative institutions – at the height of the Covid-19 period, when organizational flexibility is needed, now more than ever. She says, “We need to act like a private entity”. Hadas Magen When Shulamit Geri, the new director general of the Bank of Israel, describes how the bank managed to carry on working during the Covid-19 period, she perhaps unintentionally provides the most accurate description of the character and organizational structure of that institution, in one story.
“For a conservative entity like the Bank of Israel, what we did was a revolution,” says Geri. “Up until the coronavirus, the perception was that it was impossible to work outside the building because of confidentiality. With the outbreak of the pandemic, this approach was upended.”
The bank pulled 15 computers out of its safe, bought another 685, and moved all of its employees to remote work. “Everything worked like a Swiss watch” Geri says with pride.
Well, you know, there’s hardly an entity – including huge institutions – that hasn’t made that move during Covid-19.
“But as I said, the Bank of Israel is very conservative in many ways. And when I ask myself, where can we go with remote work, now that we see it’s possible, it’s an opportunity to make a profound cultural change in the public sphere.”
What, for instance?
“We’re giving this issue deep consideration, and examining the model of continued partial work from home that will allow employees more flexibility. At the same time, we’re also considering introducing a hybrid model enabling a more flexible use of bank office-space. We’ve had a space shortage here, and this may save resources. Remote work also offers options for ‘diversity hiring’ – we already have a hundred employees who fit this category – but it opens up more options: for example, employing people who live far away.”
You can view Geri’s enthusiasm with skepticism, but she certainly has plans for tackling quite a few issues at in the institution in need of attention. “It’s very important to make organizational changes and remove bureaucratic barriers because we waste a lot of time on these things,” she says. “We love our procedures, but we have to allow enable things to work faster. Bureaucracy has to be minimal, whether in finance or procurement. We went through a process like this at the Weizmann Institute, and I believe we’ll make a change here as well. Although we’re a public institution, we need to act like a private entity that understands the meaning of time. I want lean and rapid procedures that will allow us to concentrate on what’s most important. We shouldn’t be thinking about why things are not allowed, but instead about how we can allow them.”
But Geri’s vision is liable to clash with the bank’s employees and their union – one of the country’s most powerful. Just last week, a lawsuit filed by the Bank of Israel’s National Workers Committee in with the Labor Court revealed that the transition to remote work had begun as early as 2019 – the trend only intensifying during the Covid-19 period – and that remote employees were not compensated for overtime. This puts the support on the part of the workers, which Geri so admires, in a slightly different light. (She says of the lawsuit that, “The Bank of Israel fulfills all its legal obligations to its employees, including overtime pay”).
Geri, in any case, praises the staff’s contribution during Covid-19: “We set up a special coronavirus portal for our researchers that constantly updates all kinds of economic indicators for all kinds of outcomes of economic activity, and is updated once a week. It acquires data from Google and Apple to the level of cash withdrawals. The bank even won an international award last summer for the financial metrics used to deal with the crisis. People worked day and night to optimize the system, so that the governor could provide the prime minister with the data and opinions to make the right decisions.”
And then the prime minister goes out and announces initiatives like the handouts that have nothing to do with the data, without coordinating with the Bank of Israel or the Ministry of Finance. So what was the point?
“That was a mistake. Grants shouldn’t have been distributed to everyone but only according to an intelligent mechanism. At the same time, the Bank of Israel has promoted many programs that have come into effect, and many things have been adopted, such as unpaid leave.”
Which has also been criticized widely.
“Unpaid leave must go hand-in-hand with grants to incentivize employers. This is actually a combined program, and this was what was recommended by the Bank of Israel. In practice, one part was done, and the other part was not. The way to bring people back is through incentives for employers, and not by investing money in grants. Only then will the economy begin growing. “
“The hallways were empty when I arrived”
Until she took up her post last September, Geri knew almost nothing about the Bank of Israel. As someone who worked for the Weizmann Institute of Science for 17 years, initially as a legal advisor, and then, for the past five years, as CEO and VP Administration and Finance, she had no contact with the world of central banking.
She is a lawyer by education, but in her distant past was actually in the world of entertainment, as a model and actress – she played a small role in the cult film “HaLehaka” (“The Band”) – as well as a backup singer in the pre-Eurovision Song Contest semifinals together with twin sister, Naomi. The two served together in an IDF entertainment troupe and continued their musical career even after their service. Modeling also helped fund Geri’s law studies.
In 2003, after several years as a lawyer in a private firm, she joined the Weizmann Institute, where she set up the legal department. In 2015, she was appointed CEO, and served in that position until about six months ago when she was appointed Bank of Israel director general by Governor of the Bank of Israel Amir Yaron, who made his selection after interviewing a series of candidates.
Because she entered her post in the midst of the Covid-19, period, she was not able to meet most employees face-to-face, and had to get to know them through Microsoft Teams. “It’s a strange way to start working at a large organization,” she admits. “The bank hallways were empty when I arrived. Mostly, I heard my own footsteps in the corridors.”
The CEO role at the Bank of Israel focuses more on administration than on bank policy. Geri is responsible for 900 employees, and for managing a budget of about NIS 1 billion, printing banknotes and minting coins, and managing currency inventory. She is also responsible for the bank’s IT system and data security, and for regulating the sovereign wealth fund to manage natural gas revenues, to be established at an unknown date.
One thing she is proud of is the Bank of Israel’s Credit Data Register, launched in 2019 (before her arrival), which serves both private customers seeking credit and credit providers. Since going live, the database has provided about 4 million credit reports, and about 13 million credit scores for which, she says, demand is growing. Another database, for small businesses, is under construction.
As regards credit, one claim about the Covid-19 era is that businesses are finding it difficult to obtain government-guaranteed loans, because the government guarantees are low relative to other countries that provide banks with guarantees covering 80-90% of loans.
“On government guarantees, one must distinguish between the Bank of Israel (which has no direct connection to the level of guarantees) and the state. The governor did institute plans to grant loans to the banks on good terms, precisely so that they could be rolled out to small businesses, and he expects that the loans given to the banks (by the Bank of Israel) at low interest rates will find their way to the public. We are monitoring this. Bank management is complex – they have shareholders – but this is an issue that needs to be addressed, and where there’s a need for improvement, we say so.”
One worrisome thing arising from the governor’s review of the Covid-19 period is that the strong got stronger and the weak got weaker. In other words, inequality increased.
“The situation is very difficult and the coronavirus has exposed a soft underbelly that we’ll have to deal with eventually. Societally, in Israel and in general, Covid-19 left us all feeling shaken and powerless. In a positive sense, it may have stopped our terrible wastefulness and excessive consumption.”
Government’s role is to try to reduce these vulnerabilities as much as possible, but lots of people have fallen between the cracks.
“The pandemic presented us with challenges and revealed weaknesses in Israeli society and government. The state is not flexible enough. Discretion must be exercised, and specific solutions found. To its credit, government has taken all kinds of actions: businesses were given grants that enabled some to survive. Professionals also learned to be flexible. An entire world had to learn how to operate in unconventional circumstances. Obviously, it would have been better to do things in an orderly fashion, but I don’t know if the situation was better anywhere else. This is a global crisis, and everyone improvised to the best of their understanding and abilities. We’ll have to wait until the coronavirus passes, and then see who we can rehabilitate, and who we can help, to ensure there will be growth here.”
Given that assistance to businesses and citizens is not always the central bank’s direct responsibility, in his capacity the governor took a number of significant steps during Covid-19 including freezing mortgages and removing restrictions on the prime-linked interest rate component of mortgages, purchasing $85 billion in government bonds, and later buying NIS 15 billion in corporate bonds. He also announced a plan to purchase $30 billion, to stop the shekel-dollar exchange rate falling and help exporters.
Do you think that, bottom line, mortgage relief has really helped the public?
“It’s true that prime interest rate relief hasn’t yet trickled down to the public, but there are already indications that it is beginning, and we estimate it will gain ground. The banking system is cumbersome, but in the end it will align with the Bank of Israel guidelines.”
And what about buying foreign currency? There’s widespread criticism that this action isn’t really effective.
“These aren’t trivial matters. This is a professional subject and opinions differ.”
About the bond purchases, Geri says, “People forget we were on the verge of an unprecedented financial incident. The corporate bonds purchases succeeded in creating momentum, a sense of activity when everything was dead. The same goes for the government bonds acquisitions, which enabled low-cost financing terms [by helping to lower the interest rate environment. — H.M.].
One indication emerging from the abundant data accumulated by the Bank of Israel about the effects of Covid-19, was an increased use of cash. The trend is worldwide, but with use in Israel rising 21%, Israel is among the world leaders. “Cash use is a crisis indicator,” Geri says. “Along with all the payment apps, people want something tangible and immediate.”
What about Bitcoin? Isn’t it time to darw up regulations for it, given how popular it is? Central banks in other countries have already done that.
“Bitcoin raises all kinds of difficulties, but it is becoming more and more commonly used, and we’re discussing that, too. It’s true that it cannot be ignored, but we’re not yet ready to make a decision on the issue.”
“Set cynicism aside”
As already mentioned, one of the most notable things about the Bank of Israel, and something that Geri is charged with handling – is the power wielded by the employees, who are among the most pampered public sector employees, thanks to indulgent wage agreements from previous eras. Thus, for example, in 2019, the average salary for a central bank employees was about NIS 28,000. Geri stresses that this is a wage cost, and that the average gross salary is about NIS 21,000 per employee.
Over the years, the workers committee has repeatedly thwarted management’s plans. Currently, for example, a struggle is ongoing over the bank’s hiring of external consultants.
Why does the Bank of Israel actually need outsourced employees?
“We recruit consultants for specific projects, and at the end of the project they leave the bank. The collective agreement also allows us to employ consultants at a certain rate.”
Let’s discuss employee salaries. That’s something that is particularly disconcerting in the light of the coronavirus crisis.
“Indeed, the average salary is high, but the Bank of Israel staff is of very high quality. We’re competing with commercial banks, investment companies, technology companies, and we really want to recruit quality people, so we have to pay a bit more. But money isn’t the issue here. This is a bonding place, people are connected to this organization, they take on challenges. These are people with a spark in their eyes, who want to contribute.”
It may be a little easier to keep those eyes sparkling when, during a pandemic, they’re in one of the country’s most secure jobs with the best fringe benefits.
“I would set cynicism aside. Clearly there’s something in this place that provides employees with a sense of security, but when I look at pay, if we compare ourselves with our competitors in the labor market, which are the banks, insurance companies, investment entities, high-tech, we are in different worlds.”
At the beginning of Covid-19, solidarity was the word. Everyone was expected to make sacrifices to deal with the pandemic and flatten the curve. Only public sector workers would continue to work as usual. Don’t you think there’s a place for Bank of Israel employees, like other public sector workers, to contribute their share?
“Government ministries, including the Bank of Israel, need to think about how we are contributing to the country’s effort to recover. We need to be a model for this issue, and that’s something we think about. We have internal discussions about it, and I think the entire public sector should lend a hand to see how we can help those who are having a hard time during this period. “
“We have a way to go, but the glass ceiling has been broken”
Geri was appointed to a senior position at the central bank at the end of a period when the top positions were staffed by women. Karnit Flug had recently served as governor, her deputy was Nadine Bodo-Trachtenberg, and the Supervisor of Banks was Hedva Ber. On the private sector side, three banks – Bank Leumi, Bank Discount and First International Bank – were all headed by women. Today, all six of these roles are filled by men.
Do you think we’re experiencing a setback as far as having women in senior financial sector positions is concerned?
“I think it’s random. There’s no hidden hand here. Women have come a long way in the banking sector, and I believe that in the next round, if there are women candidates, women will be selected. If you ask the governor who hired me, he’ll say that the fact that I’m a woman was a non-issue for him. That doesn’t mean we’ve reached a place where we can rest easy, we have a way to go, but the glass ceiling has been broken.”
Published by Globes, Israel business news – en.globes.co.il – on March 1, 2021
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