Reaction to the publication of the report of the Parliamentary Inquiry

 

The Bank of Israel's reaction to the publication of the report of the Parliamentary Inquiry into the Financial System's Behavior in Credit Restructuring to Large Business Borrowers (the Cabel Committee)


The Committee's report ignores material facts and many changes that have already been made, reaches mistaken conclusions, and bases risky recommendations on those conclusions without examining or analyzing the future implications of its recommendations.

 

The report does not give sufficient weight to, and does not recognize the importance of, maintaining depositors' money over the past decade, at a time when there was a serious global financial crisis and when banks were going bankrupt, causing immense financial damage to citizens in many countries.  The fact that the Israeli public is able with absolute certainty to withdraw the money deposited in its account at any time is not self-evident.  Financial stability in Israel is the main result of effective supervision.

 

The report ignores the measures taken to lower credit to large borrowers, the large actual decline in such credit, the data that show that credit losses by the banks in Israel are very low by international comparison and over time, and the fact that a large portion of the measures were taken in real time, as a result of which supervision was able to prevent the realization of large risks to the economy.  The report calls for increased coordination and exchange of information between the regulators, but ignores the fact that following a prolonged legislative process, the Financial Stability Committee, led by the Bank of Israel Governor, has been established and has started to operate, which will create the synchronization between all member financial regulators.  The report ignores the many structural changes being led by the Bank of Israel and the Ministry of Finance to promote financial competition, which are already taking shape. An example is the fact that just last week, two additional significant measures were completed, as the Credit Data Sharing system established by the Bank of Israel went online, and another financial player was created with the separation of another credit card company from a large bank.  The ignoring of these facts, in addition to how some of the discussions were held, raises serious concern that a large part of the Committee's recommendations were predetermined, without connection to the large amount of information presented to the Committee, and without sufficient professional discussion as required for such an essential issue.

 

Even though the Committee declared that it did not intend to harm the credit market, a large part of its recommendations may lead to precisely that outcome.  The Bank of Israel warns that the adoption of a large part of the report's main recommendations may in practical terms lead to on-going political intervention in the supervision and regulation of the financial system, to the point of truly impairing the ability to maintain the financial system's stability and the business sector's security in taking credit and in operating in Israel.  The volume of regulatory reporting to the Knesset can be expanded in a way that is transparent to the entire public, but it is important to ensure the main principle of maintaining the independence of all financial regulators and of the Bank of Israel.

 

The Bank of Israel will continue to act professionally, fearlessly, and with a long term view of the public good and the good of the Israeli economy.