The big banks must not be weakened, the economy needs them, Bank Leumi (TASE: LUMI) CEO Galia Maor told the "Globes" Israel Business Conference in Tel Aviv this morning.
"Despite the banks' proven contribution to the running of the economy in time of crisis, we witness repeated calls to weaken the banking sector in general, and the large banks in particular. In my view, the lessons of the global financial crisis are that we should do exactly the opposite. Weakening the banks, which have emerged as a stabilizing factor, is liable to threaten the stability of the financial system in the future and to have an adverse effect on the Israeli economy. The economy desperately needs big banking institutions capable of providing for its development needs, and so I believe that the attempts to weaken the big banks in Israel are mistaken," Maor said.
Maor also commented on financial regulation. "I think that the changes in the regulation of the financial system need to be gradual and adapted to the needs of the economy. The Israeli banking system has a good, proven immune mechanism. Therefore, let us not be hasty in taking prescriptions from elsewhere in the world for sicknesses we don’t have," she said.
Maor does not believe that the financial crisis is behind us. In her estimation, the level of risk in the markets has fallen, but the global financial system has not yet stabilized. "The system has certainly not returned to business as usual, especially as the transfer of debts from private hands to states threatens economic stability."
The main question in the next few years in Maor's view is risk management. Clear, sharply defined risk management will lead to lower profits. "The crisis has raised awareness of the need for effective risk management in financial markets. There is no limit to the importance and management and hedging of risks."
Maor is highly concerned at the decline in human capital in Israel and the harm to the country's competitive advantage. "Israel is based on high-quality human capital and technological knowledge, built up over many years through massive investment, mostly public, in human capital, both in the research universities and in the defense establishment. In recent years, these systems have suffered budget cuts, and their ability to maintain the positive conditions into the future and service, over time, an advanced economy, oriented towards exports of high-tech products, is no longer assured. Preserving our advantages in these areas is critical to our future development."
Published by Globes [online], Israel business news - www.globes-online.com - on December 13, 2009
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