Data Management Initiative: Bank of Israel

Throughout the Covid-19 crisis, central banks have needed to compile increasingly accurate portraits of their economies in deploying policies to support the financial system. Traditional metrics, such as inflation or unemployment data, were arriving too late or were unreliable because of disruptions caused by local lockdowns.

In Israel, the central bank decided to leverage technology to gather different sources of real-time data to make quick decisions. “In normal times, such information is too shortsighted to be helpful. But, with things developing rapidly, it has given critical insight into people’s habits,” says Andrew Abir, deputy governor of the Bank of Israel.

The central bank quickly established a new team and system to collect, organise and analyse new sources of real-time data. The aim was to collect data from internet sites and informal information sources within two days of a citizen’s activity. This included daily credit card purchases, which enabled the central bank to assess economic activity and trends.

A data storage system was also established to allow the central bank’s analytics functions to draw information from a single integrated source. “We developed a dashboard portal that presents the most relevant indicator,” explains Abir. The information gathered was used by the bank’s senior management to make policy decisions, and by the research department to formulate forecasts. The governor also used the new information to provide advice to the government in his role as an adviser.

The Bank of Israel’s supervision department also benefited, and was able to create a framework for deferring loan payments as a result. According to Abir, the department could use reports that were prepared in advance of the crisis alongside new data collected on credit balances, credit prices and the scope of payments deferred for banking system customers. Decisions on reducing capital requirements were also made based on this data.

“Alongside the information collected during routine times, we requested frequent updates on information used to assess risks with regard to credit risks, market risks and liquidity risks, alongside reports on the banks’ compliance with various regulatory limitations,” he explains.

Apple and Google were among the new data sources used by the central bank. Both companies made the information public, while keeping individual identities private, to help authorities better respond to the global health crisis. For example, when traffic returned to commercial hubs, it signalled furloughs were coming to an end.

The information gathered also helped inform government policy. New credit data was used to make recommendations to the ministry of finance regarding the effectiveness of the liquidity tool provided in the form of government-guaranteed funds.

“These principles that were implemented for the first time in the crisis now serve as integral parts of day-to-day work methods,” says Abir. The central bank will continue to monitor these new data channels throughout the pandemic and during Israel’s recovery.