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Issues in Private-Sector Finance in Israel

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  • Philip Hemmings
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    Abstract

    The 2008-09 global financial crisis did not result in the failure of any major financial institution in Israel, but it did reveal vulnerabilities in the non-banking sector . particularly in the corporate-bond market. Conservative regulation of the banking sector helped this segment avoid a financial meltdown, and low loan-to-value ratios in mortgage lending are undoubtedly helping limit the pace of house-price increases. Nevertheless, as elsewhere, capital requirements and stress tests for banks have been ramped up. Also the identification and monitoring of systemic risks and macro-prudential problems has intensified. In the Israeli context somewhat unusual issues arise from the control of most of Israel.s major financial institutions by family-based business groups that have significant interests in non-financial sectors of the economy. This close link between the financial and non-financial sectors generates potential risks to financial stability, and it is a key issue in a wider debate about the relative merits of the business groups in terms of competition and control in the economy. This Working Paper relates to the OECD 2011 Economic Survey of Israel (www.oecd.org/eco/surveys/Israel). Enjeux de la finance privée en Israël La crise financiere mondiale de 2008-09 n'a entraîné aucune banqueroute parmi les grands établissements financiers en Israël, mais elle a révèle les vulnérabilités du secteur non bancaire, en particulier sur le marche des obligations de sociétés. Une réglementation bancaire rigoureuse a notamment permis d'éviter l'effondrement du secteur financier, tandis que les quotités prudentes des prêts immobiliers contribuent indubitablement à limiter la hausse des prix résidentiels. Toutefois, les exigences de fonds de propres et les tests de résistance des banques ont été renforcés comme ailleurs. L'identification et le suivi des risques systémiques et des problèmes macroprudentiels ont aussi été intensifies. Dans le contexte israëlien, des questions quelque peu inhabituelles se posent du fait que la plupart des établissements financiers d'Israël sont controlés par des groupes familiaux qui détiennent des participations significatives dans les secteurs non financiers de l'économie. Le lien étroit entre les secteurs financier et non financier est susceptible d'engendrer des risques pour la stabilité financière et pourrait devenir un enjeu majeur dans le cadre du débat plus large sur les mérites relatifs des conglomérats du point de vue de la concurrence et du contrôle au sein de l'économie. Ce Document de travail se rapporte à l'Étude économique de l'OCDE d'Israël 2011 (www.oecd.org/eco/etudes/Israel).

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    File URL: http://dx.doi.org/10.1787/5kg0s2dw8qxx-en
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    Bibliographic Info

    Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 913.

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    Date of creation: 06 Dec 2011
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    Handle: RePEc:oec:ecoaaa:913-en

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    Keywords: corporate governance; securitisation; finance; pensions; business groups; Israeli banking; Israeli finance; institutional funds; bank; Israel; corporate bonds; micro-prudential oversight; macro-prudential oversight; surveillance macroprudentielle; groupes; gouvernement d'entreprise; fonds institutionnels; obligations de sociétés; retraites; système financier israélien; système bancaire israélien; titrisation; banque; finance; Israël; surveillance microprudentielle;

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