By Tova Cohen
TEL AVIV, Oct 20 (Reuters) - Israel on Sunday named Karnit Flug as the new governor of its central bank, the first woman to be appointed to the office, after a rocky selection process that dragged on for months.
Flug, 58, served as deputy to previous governor Stanley Fischer, who stepped down in June after eight years on the job, and has been the Bank of Israel's acting chief since he left.
Accepting the post, Flug said in a statement the central bank and Israel's economy faced significant challenges.
Announcement of Flug's appointment followed a meeting between Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid, who had been unable since Fischer resigned to fill the post.
Fischer had recommended Flug to replace him, but Netanyahu, officials said, had preferred candidates with a stronger international standing.
Netanyahu and Lapid initially chose Jacob Frenkel, central bank governor in the 1990s and currently chairman of JPMorgan Chase International, to succeed Fischer, but he pulled out following reports he had been arrested on suspicion of shoplifting at Hong Kong's airport in 2006.
Frenkel denied any wrongdoing, and authorities in Hong Kong decided not to pursue the case.
A second candidate, Bank Hapoalim Chief Economist Leo Leiderman, also dropped his bid two days after his nomination, citing personal reasons.
Netanyahu and Lapid said in a statement: 'We were impressed by Dr. Flug's performance over the past months as head of the Bank of Israel and we are confident she will continue to help us lead Israel's economy to further achievements in the face of the world economic upheaval.'
Flug completed her doctorate at New York's Columbia University and worked at the International Monetary Fund as an economist and later as a senior research economist at the Inter-American Development Bank.
She was appointed director of the research department at the Bank of Israel in 2001.
Until this weekend there were three candidates who had been considered in the running for governorship of the bank: former Argentinian central bank president Mario Blejer, former Bank of Israel Deputy Governor Zvi Eckstein and former Mizrahi-Tefahot Bank Chief Executive Victor Medina.
Netanyahu warmed to the idea of Flug's candidacy in recent days after he and Lapid failed to agree on the other candidates, TheMarker financial newspaper reported.
(Additional reporting by Ari Rabinovitch, Editing by Jeffrey Heller) Keywords: ISRAEL CENTRALBANK/
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