Bank of Israel Reporting Regulation

The Bank of Israel’s mandatory derivative reporting requirement on over-the-counter derivatives on FX and rates has been in effect since 1 January 2017. It followed the first Bank of Israel reporting regime, introduced 1 July 2011.

The Bank of Israel reporting regime is unique in two key areas: 

• Extra-territoriality – requires foreign firms (and any foreign firm over the volume threshold) to report, with possible financial sanctions for firms failing to report.
  
• Reportable asset classes – although only FX and rates derivative transactions in Israeli new shekels (ISO currency code: ILS), (or otherwise involving or referencing a shekel-denominated asset, benchmark or rate) are reportable, the reporting obligation also includes FX spot, which is not typically considered to be a derivative.

The reporting obligation started on 1 January 2017 for all reporting firms. Firms were able to apply to the Bank of Israel for an extension, providing their application was received before 1 November 2016.

The following firms are required to report:

• Israeli banks
• Israeli financial institutions above the threshold
• All non-Israeli firms above the threshold 

The volume threshold concerns average daily notional executed (irrespective of whether this was on the firm’s own behalf or on behalf of clients) over a rolling lookback period of one year. If the average daily notional of reportable FX instruments and reportable options over this lookback period for that firm exceeds USD 15 million in aggregate gross notional, then firms will need to report to the Bank of Israel until a year has passed with the average daily notional threshold not being met. The day count convention used is 250 days per year.

Derivatives from FX (includes FX spot) and Rates that are shekel-denominated, involve the shekel, or reference a shekel yield or interest rate, must be reported:

The following instruments are as follows (are shekel-denominated, involve the shekel, or reference a shekel yield or interest rate):

• FX spot 
• FX forwards 
• FX swaps 
• FX contracts for difference (CFDs)/spread bets 
• Inflation swaps 
• Forward rate agreements (FRAs) 
• Interest rate swaps (IRS) 
• Coupon swaps 
• Basis swaps 
• Cross-currency swaps 
• FX options (deliverable and non-deliverable) 
• Inflation options 
• Rates options, caps and floors

T+1, the day after the trade is executed. A monthly report of all reportable transactions executed in that month must be submitted, as well as all transactions outstanding at the end of the month and their valuations.