The Committee to Assess the Debt Restructuring Proceedings in Israel
The committee was established due to the need for regulatory involvement in debt arrangements in light of the increasing concern over the expansion of the phenomenon in the next few years and its ramifications for public savings and for investors; the concern over the phenomenon’s ramifications for the desired norms regarding the ability of companies and households to meet their debts, and the concern that various debtors are not treated according to clear criteria.
The committee will be led by Finance Ministry Director General Yael Andorn, and will include Israel Securities Authority Chairman Prof. Shmuel Hauser; Bank of Israel Research Department Director Prof. Nathan Sussman; Supervisor of Banks Mr. David Zaken; Commissioner of Capital Markets, Insurance and Savings Prof. Oded Sarig; National Economic Council Head Prof. Eugene Kandel; Deputy Attorney General Avi Licht; Prof. Yishay Yafeh, Dean of the Hebrew University’s School of Business Administration; and the Director of the Postal Bank, Mr. Yoel Naveh.
The statement of appointment authorizes the committee to assess the field of debt restructuring in Israel, and to formulate recommendations for arranging various aspects of the matter, including:
- To examine establishing principles, including joint principles, for debt restructuring proceedings of borrowers from various sectors, as well as their ramifications for credit provision and pricing;
- To assess the arrangement of debt restructuring formulation and approval processes, including how to avoid the concern of conflicts of interest in formulating and approving the restructuring plan;
- To examine establishing principles for placing limitations on the controlling shareholder of a company in a debt restructuring arrangement that includes significant harm to lenders, including terms for banks or institutional entities to provide credit to a company that has carried out a debt restructuring proceeding that included write-offs or to a company controlled by someone who was involved in dissolution, bankruptcy, or a debt restructuring arrangement that included write-offs;
- To assess the need for due disclosure regarding debt restructuring arrangements made for non-tradable debts, in cases where these arrangements have public aspects.
The statement of appointments includes the following: “Recognizing the broad ramifications of the debt restructurings phenomenon for the financial system and the public’s trust in it, while also recognizing the abilities of businesses to continue raising debt in order to expand their business operations, which supports the growth of the Israeli economy, we have reached the conclusion that it is necessary to conduct a comprehensive assessment of the various aspects of the issue of debt restructuring arrangements in the economy. Such an assessment must be done with due attention paid to the changes made in the legal and regulatory infrastructure since the crisis began. Such an assessment is also currently required due to the concentration in the Israeli economy in general, and in the field of credit in particular.”
The total credit granted to the public by the banking system currently stands at NIS 860 billion, and the total credit issued to the public through institutional entities and the capital market is estimated at NIS 380 billion (balance sheet total at the end of 2012, excluding designated bonds totaling NIS 150 billion).