TEL AVIV Jan 20 Banks in Israel will have to
meet a reserve requirement for foreign exchange derivative
transactions by non-residents, the Bank of Israel said on
The central bank published an amendment to the liquidity
directives that will become effective on Jan. 27. A 10 percent
reserve requirement will apply to shekel/foreign exchange swaps
and shekel/foreign exchange forwards.
"In the last few months the volume of foreign exchange
derivative transactions by non-residents has increased
markedly," the Bank of Israel said.
"A significant part of the increase in non-residents'
transactions is in short-term instruments. This measure will
strengthen the Bank of Israel's ability to achieve the
objectives of its monetary, foreign exchange and financial
The shekel weakened in response to 3.61 shekels per dollar
from 3.56 prior to the announcement.
A Bank of Israel source said the measure will make this type
of transaction less attractive for foreign players.
"It makes the transaction more expensive for local banks,"
the source said, as the banks will not get interest on the 10
percent reserves and this will carry over to foreign banks.
On Wednesday, the Bank of Israel said it will require
Israelis and foreigners to report on transactions in foreign
exchange swaps and forwards of more than $10 million in one day
to improve its ability to analyse trends in these instruments.
Additionally, non-residents who perform transactions in
short-term Bank of Israel bills called makams and short-term
government bonds of more than 10 million shekels in one day will
be required to report details of the transactions and their
balance of holdings of such assets.
(Reporting by Tova Cohen; Editing by Toby Chopra)