Issues in Private-Sector Finance in Israel
OECD Economics Department Woking Papers: http://www.oecd-ilibrary.org/economics/issues-in-private-sector-finance-in-israel_5kg0s2dw8qxx-en
Download Document| Date Published | 2011 |
| Version | |
| Primary Author | Philip Hemmings |
| Other Authors | |
| Theme | |
| Country | Israel |
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.