Israel's Supervisor of Banks Dr. Hedva Ber said the banks’ exposure to Israeli tycoons had been significantly reduced in recent years and that those same tycoons were mostly funded by institutional players today.
At a Wednesday hearing of the Knesset Finance Committee, Ber appearing for the first time said, “The Bank of Israel learned its lesson from past losses and toughened its policies.” She said, “Regulation led to stringent restrictions for large borrowers,” and worked to “divert banking activity towards households and small businesses.”
She further emphasized, “The banks’ exposure to large borrowers was drastically reduced,” but that they are still “handling failed loans to large borrowers, which had been granted in the past.”
As previously mentioned, Ber stressed the “big borrowers are funded today mainly by the institutional actors” and not by the banks. She said that in recent years their exposure to big borrowers fell from 10.1% of their total credit in 2008 to 4.5% in 2015.
Ber also said debt restructuring was offered not only to the tycoons but to households in “extreme” situations. According to the data Ber presented, in 2013-2014 the banks restructured the debt of 26,000 private clients for a total of NIS 845 million.
Ber stressed at the hearing the willingness of the Bank of Israel to increase competition in the financial system, given the recent steps on the supervision of the banks.
The supervisor also commented on the fees charged by banks, saying “fees for households have dramatically decreased in recent years. Customers can lower their costs by using the internet. A growing competition, new technologies, and streamlining efforts led to further decreases in the costs of banking and credit services as well as an improvement in the product served to customers.”
Association of Banks in Israel CEO Moshe Pearl added, “The picture painted here according to which banks waive debts for businesses without any reason while chasing households to the edge is completely distorted and is the opposite of reality. When credit is doled out, there will always be those that struggle to make payments, but the question is whether that shows a problem with the system and the answer to that is a resounding no.”
Pearl claimed the creditworthiness of Israeli banks has passed all tests. He presented official figures, showing the bad debt ratio for the Israeli banking system stood at 2.2% while other OECD countries have a ratio of 6.2%.
“Israeli banks knew to supply credit in a better fashion than most systems in the world,” added Pearl.
Published by Globes [online], Israel business news - www.globes-online.com - on January 28, 2016
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