"It is necessary to ensure that the non-bank credit market does not explode in the economy's face, not just the banking system's face, and that is the greatest risk," warned Bank Hapoalim (TASE: POLI; LSE:80OA) president and CEO Zvi Ziv today at the Herzliya Conference.
Ziv added, "It is hard to exaggerate the degree of uncertainty in 2009. I cannot say what will happen in Israel and not in Israel. If the government does not find a solution to the ticking non-bank credit bomb, there could be a huge snowball beyond the capabilities of Bank Hapoalim and the other banks."
Ziv lambasted the government's handling of the economic crisis so far, and he expressed deep frustration that the business sector is not the government's partner because the government has not consulted with it. "The Ministry of Finance takes care not to consult with us before making decisions that the banks must play a key role in implementing. As a result, poor plans are liable to be formulated, which will be ineffective and won't help the economy. For example, the plan to help the real estate market is in appropriate. There is no problem of capital in real estate; the problem is that there are no buyers. There is credit."
Earlier, Ziv responded to the criticisms leveled against the bonuses paid to bank managers. He called the furor over the bonuses "pathetic". He said it was a non-issue. "To obtain a bonus, a bank must achieve a return on equity of at least 8.5%. This means that next year, too, on the basis of forecasts, no bonuses will be paid," he said.
Commenting on the banks' stability, Ziv said, "This is a tough year, and we hope that next year won't be worse." He added that the current capital adequacy ratio was "a sufficient cushion."
Former Bank Hapoalim director Prof. Amir Barnea said, "Bank Hapoalim's profit guidance is very problematic. Why does it expect such a low return on equity in 2009? It seems that we're dragging a load from the past that we have not yet disclosed. I was very surprised that the controlling shareholders did not inject capital into the banks."
Israel Discount Bank (TASE: DSCT) chairman Shlomo Zohar said, "I have no doubt that the current focus on increased regulation will not rescue us from the current crisis, but we should apply the lessons to prevent the next crisis."
Published by Globes [online], Israel business news - www.globes-online.com - on February 4, 2009
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