December 1948 NEW CURRENCY SYSTEM IN ISRAEL Two ordinances of the Provisional Government the war it became the largest banking institution of Israel, dated August 16, 1948, established a new operating in Palestine. Under an agreement with currency and granted the Anglo-Palestine Ban\ the Provisional Government, the Ban\ has estab- Limited the sole right of issuing ban\ notes. Up lished an Issue Department in Tel-Aviv, completely to that date, the legal tender currency of Israel separated from its Banking Department and man- was the Palestine pound, issued by the Palestine aged by a special committee of directors appointed Currency Board under the Palestine Currency by the directors of the Ban\. The operations of Order of 1927. The Palestine pound is at par with the Issue Department and its profits and losses the pound sterling and covered by a 100 per cent are solely on Government account. The Ban\ also sterling reserve. Until February 22, 1948, Pales- acts as the sole banker and financial agent of the tine was part of the sterling area. Government, without receiving any remuneration The new currency is called the Israel pound and for these services and without paying any interest —li\e the Palestine pound—is divided into 1,000 on Government credit balances. The Agreement mils. Palestine currency notes were convertible into with the Government will remain in force until Israel pounds at par until September 15, 1948; June 30, 1951, unless terminated at an earlier date since that date, conversion has been possible only by the Government. at the discretion of the Ban\. Palestine coins con- The Palestine currency continues to circulate for tinue to circulate at par. The new ban\ notes the time being in the Arab portions of the country are to be covered by gold, balances in foreign cur- and in Trans-Jordan. The Trans-Jordan Govern- rencies approved by the Finance Minister, and ment, however, is reported to be planning the estab- Palestine currency notes, as well as by short-term lishment of its own currency. Treasury obligations and commercial paper re dis- The Ban\ Notes Ordinance, the Agreement be- counted or acquired from other ban\s. The first tween the Government and the Ban\, and the Cur- three of these items must cover at least half of the rency Ordinance are given below in English trans- total note circulation. lation* The Anglo-Palestine Ban\ Limited was originally incorporated in England, on February 27, 1902, * This translation was received from the Anglo-Palestine Bank under the title "Supplement A to the Official Gazette of by the Jewish Colonial Trust Limited. During the Government of Israel," dated Aug. 17, 1948. BANK NOTES ORDINANCE—NO. 18 OF THE YEAR 5708—1948 The Provisional Council of State hereby enacts signing of the Agreement and the date of the sign- as follows: ing, shall be conclusive evidence of the contents of 1. Interpretation. In this Ordinance every expres- the notice. sion shall have the same meaning as it has in the 4. Confirmation of the Agreement. The Agreement text of the Agreement set out in the Schedule to and all its provisions shall be lawful in every re- this Ordinance. spect and each of the parties thereto shall be deemed 2. Authority to execute the Agreement. The Pro- to be empowered to do everything which he is re- visional Government and the Bank shall be author- quired or authorised to do in accordance therewith, ised to execute the Agreement in accordance with and any provision of law which is inconsistent with the text set out in the Schedule to this Ordinance the provisions of this Ordinance shall not apply to (the signed text is hereinafter called "the Agree- the Agreement and to the parties thereto. ment"). 5. Effect of charge and exemption from registration, 3. Proof of signature and date. A notice by the Cap. 22. The charge which is created by the Bank Finance Minister in the Official Gazette as to the by virtue of the Agreement shall be deemed to be 1464 FEDERAL RESERVE BULLETIN Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis December 1948 NEW CURRENCY SYSTEM IN ISRAEL a floating charge which is registered in accordance 13. Commencement. This Ordinance shall come with the Companies Ordinance, but the Bank shall into force immediately after midnight on the 12th be exempt from the duty, imposed upon it by the day of Ab, 5708 (August 17, 1948). said Ordinance, to register the charge. 14. Title. This Ordinance may be cited as the 6. Exemption from stamp duty. The Agreement Bank Notes Ordinance, 5708—1948. and the bank notes shall be exempt from all stamp duty. SCHEDULE 7. Exchange of bank notes for currency notes. Un- AN AGREEMENT made between the Provisional til the 11th day of Elul, 5708 (September 15, Government of the one part, and The Anglo- 1948), inclusive, every person shall be entitled to Palestine Bank Limited of the other part. deliver to the Issue Department currency notes in Palestine pounds and mils which have been issued 1. (a) In this Agreement the following expres- by the Palestine Currency Board, and to receive sions shall have the following meanings: in exchange therefor from the Issue Department, (1) "man" or "person" shall be construed as bank notes for the same amount in Israel pounds including any legal person; and mils. After the expiration of the said day, the (2) "the Bank" means the said Anglo-Palestine Issue Department shall no longer be liable to ex- Bank Limited, a company which was incorporated change bank notes for currency notes as aforesaid, on February 27, 1902, in England in accord- but it shall be entitled to do so in such cases and to ance with the English Companies Acts of the years such extent as the Committee shall deem fit at any 1862—1900, and registered as a foreign company time and from time to time. in Palestine in accordance with the Companies Ordi- 8. Mutilation of bank notes. Every person who nance (Cap. 22) and deemed to be registered in the wilfully defaces or tears or cuts or otherwise muti- State of Israel in accordance with sub-section (a) lates any bank note, shall be guilty of a misde- of section 20 of the Law and Administration Ordi- meanour, and shall be liable to imprisonment for nance, 5708—1948, and includes every successor three months or a fine of one hundred Israel pounds in title; or to both such penalties. (3) "other bank" means a company limited by 9. Barring of plea. No person shall be permitted shares which is recognized as a bank in accordance to plead that he did not know of the existence or with the Banking Ordinance, 1941, or any other the provisions of the Agreement and of this Ordi- Ordinance which is substituted therefor or is sup- nance. plementary thereto and any other person recognized 10. Proof of bank notes. A certificate which pur- as such by the Finance Minister for the purpose ports to have been given by the Finance Minister of this Agreement, provided that its paid up capital or a person authorised by him in writing in that is not less than fifty thousand Israel pounds; behalf and which states that any document whatso- (4) "Committee" means a committee which is ever which is attached to that certificate is a bank appointed in accordance with the provisions of note or a forged bank note shall in every civil or clause 11 (a); criminal proceeding and in every quasi-judicial pro- (5) "Banking Department" means the depart- ceeding be conclusive evidence of that fact, unless ment of the Bank in which all the banking business it is proved that the certificate was not given by the of the Bank, except the business of the Issue De- Finance Minister or a person authorised by him partment, is carried on; in writing in that behalf, or that the certificate was (6) "Issue Department" means the department not given in respect of that bank note. for the issue of bank notes which is set up by the 11. Inapplicability. The provisions of section 9(b) Bank in accordance with the provisions of this of the Law and Administration Ordinance, 5708— Agreement; 1948, shall not apply to this Ordinance. (7) "director" and "manager" shall have the 12. Enforcement and rules. The Finance Minister meanings assigned to those expressions in the is charged with the enforcement of this Ordinance, Hebrew text of the Companies Ordinance (Cap. and he may make rules in respect of any matter 22); relating to its enforcement. (8) "bank note" means a promissory note which DECEMBER 1948 1465 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis December 1948 NEW CURRENCY SYSTEM IN ISRAEL is issued by the Bank in accordance with the pro- 5. The Bank shall separate completely the issue visions of this Agreement and according to which of bank notes from the other business of the Bank the Bank will pay to bearer the amount mentioned and shall carry on the management thereof sepa- therein. rately and distinctly from the other business of the (b) In this Agreement, the use of the singular Bank in a special department therefor, which the shall be deemed to include the plural and vice versa, Bank shall set up in Tel-Aviv and which shall be unless the context otherwise requires. called "The Issue Department of the Anglo-Pales- 2. At any time and from time to time the Bank tine Bank Limited." The Bank shall keep special shall be authorised— accounts in respect of everything concerning the (a) to issue and re-issue bank notes in such form business of the Issue Department, and such accounts and with such contents as the Bank shall from time shall be completely separated from the accounts of to time determine, with the approval of the Finance the Banking Department.