Israel’s banking system is stable, compared to other countries worldwide, which have been in a financial crisis in the past year. This was determined by Bank of Israel in a report published today on foreign residents’ activities with Israeli banks.
The report’s compilers emphasize that the steadfastness of the Israeli banking system stems from, among other things, the fact that it practically does not lean on foreign banks to raise its sources. According to Central Bank statistics, banks in Israel have a $6 billion surplus of foreign currency, deposited in banks abroad.
The compilers of the report also stress that so far, no speculative activity on the part of foreign residents was recorded in Israel, not even by converting foreign currency into shekels, in order to benefit from the interest rate gaps between the shekel interest in Israel and interest abroad. This is in contrast to a number of Israeli borrowers who choose to take credit in Japanese yen and Swiss francs, to benefit from low interest in this currencies, compared to the shekel interest rates.
The Bank of Israel sources noted that assessment of exchange rate risks by Israeli residents is not the same as that of foreign residents. Local credit is one of the incentives through which foreign residents can perform speculative actions, obliging many states worldwide to protect their exchange rate at a certain level. "So far, no speculative activity was posted in Israel, but this is very familiar, not only from experience of emerging countries but also from the experience of developed countries."
Published by Israel's Business Arena September 23, 1998