The Bank of Israel says databases it plans to establish with customer data will not include identifiable information. The central bank issued the statement after announcing plans to require commercial banks and credit companies to transfer information on their customers' activities over the last five years for the purpose of establishing a big data database.
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According to the Bank of Israel, the database's establishment will benefit the collection and analysis of a greater amount of data to increase efficiency in the financial system.
The Bank of Israel is also dependent on the increased use of big data by other central banks around the world. According to a recent report by the Bank for International Settlements, an international financial institution owned by central banks, around 80% of central banks around the world are discussing using big data, and "the vast majority" are focusing on "projects that involve big data."
Around 70% of this use concerns financial research, while 40% is used for policymaking, as some central banks use the data for both ends.
Nevertheless, the BIS statement does not say anything about central banks collecting data by obligating commercial banks and credit farms to transfer data. Nor has the Bank of Israel said anything about protecting user data or the possibility sensitive information could get out, either through a cyberattack or other means.
Last month, the Bank of Israel announced the establishment of another database, Mesila, for the "improvement of monetary and financial statistics" that is set to include detailed information on credit loans for the business sector.
The Bank of Israel claimed the new database "will not include identity cards, account numbers, and the like as these will automatically be erased as soon as the data is received and its use for researching the database is exhausted."
However, the bank later noted "identification data are necessary for initial receipt [of the data], for its construction from several sources of information. It is important to note that that this is a one-time, not ongoing report."
In essence, then, personal financial information will in fact be tied to identifiable details.
The Bank of Israel added that "following the exhaustion of financial insights from the database, the entire database will be erased and will not be preserved by the Bank of Israel." However, the bank did not provide a timeframe for how long it would take for these insights to be exhausted beyond saying "the collection of data from the banking system is carried out in accordance with the Bank of Israel Law, similar to other regularly received reports," it said.
"This report was carried out at the highest and most stringent standards for maintaining privacy, as was done in practice with the bank's database of credit date that has existed and been in operation since 2019," it said.
According to the Bank of Israel, "The current project is being carried out with the help of the bank's privacy commissioner, the legal department, and information security experts, additionally, on this issue, the Bank of Israel is working in accordance with Justice Ministry guidelines."
In addition, the bank defended the purpose for establishing the database, saying it saw great value in making more precise and correct decisions through the use of big data databases. "The need for the analysis of such a database is tied to several issues at the heart of the Bank of Israel's activities, and it has significance for achieving objectives for the benefit of the Israeli market."
The Bank of Israel said such a database could, for example, improve the "efficacy of the government's aid program during the coronavirus crisis, as well as with the influence of restrictions on the economy and various populations. Likewise, the Bank of Israel, in cooperation with the Justice Ministry, is leading an interministerial team focusing on issues of financial inclusion, so that additional populations will be able to have access to basic financial services and improve their financial situation.
"In addition, the database will allow for informed decision making on issues such as the use of cash and implementing advanced means of payment and communication," the Bank of Israel said.
The Justice Ministry has yet to comment on the report.
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