Written by: Aaron Katsman | January 21, 2009
Looking to ease the local Israeli credit crunch, a new program freeing up 6 billion Shekel has gone into effect. According to a JPost report:” A program to guarantee as much as NIS 6 billion in borrowing by commercial banks to help shore up their capital base and increase lending went into effect Monday, the Finance Ministry announced. The guarantees are being offered to lenders issuing subordinated notes, the ministry said. “These guarantees will enable the banks to raise capital and make loans in the tens of billions of shekels, thereby easing the crunch in the credit market and helping business to succeed in this difficult period,” Finance Minister Ronnie Bar-On said.”
While in the US the transfer of hundreds of billions of dollars into the banking system, has for the most part, failed to jump start lending, the hope in Israel is that it will help ease the situation.
After speaking to some banks I am not so sure how much this program is going to work. Banks still aren’t in the mood to lend and will only do so in cases where the client has collateral to put up for the loan.
Written by: Aaron Katsman | November 9, 2008
Will the real Bank of Israel Governor please stand up? A week after telling us that everything is just peachy re: the Israeli economy and Israeli banking system, all of a sudden Globes is out with an article that Fischer is now ‘worried.’ The article says, “We expect 2.7% growth in 2009, and we’re accused of over optimism. In such times, if you want to be serious, you should be worried, and I am really worried. Wise men won’t tell you that there is nothing to be worried about,” said Governor of the Bank of Israel Prof. Stanley Fischer last week during a meeting of the EU-Israel Chambers of Commerce and Industry held at the home of the Ambassador of France.”
I guess Fischer figures that the Israeli public isn’t fluent in French. As posted here last week Fischer said that Israeli banks were in good shape. If so then why did he tell the Chambers of Commerce that, “There will probably be a period of a rise in unemployment, a drop in the growth rate, and some companies will find it difficult to raise capital. These things happen during a slowdown. Some companies will find it difficult to obtain credit.”
Why should it be hard for companies to get credit if the banks are safe and sound????
Gov. Fischer, please just level with us.
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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
Stanley Fischer, Governor of the Bank of Israel, spoke yesterday on the stability of the Israeli banking system. Fischer, along with many other public figures has gone out of his way to keep telling the public that the local banking system is sound. While scaring the public about bank failures is irresponsible, don’t Israelis deserve to be told the truth about what is going on? How about a little honesty from our leaders.
If everything is so rosy, then why does the BOI have a plan to stream money to the local banks in the event of a credit freeze? Is this prudent planning, or cause for worry?
As reported in Globes, Fischer spoke about how disciplined the local Israeli banks have been. “In addition, Israel’s banks had no sub-prime exposure. “Israel’s banks said ‘No’ to this paper,” said Fischer.”
Really? That’s not how I remember it. Bank in March Bank Hapoalim wrote off hundreds of millions of dollars. According to Reuters, “Hapoalim, whose shares have slid some 30 percent so far in 2008, said it posted impairments of 1.18 billion shekels, or $334 million, for its U.S. asset-backed securities portfolio. It had previously said it would write off around $300 million in the fourth quarter due to a decline in the value of its U.S. structured investment vehicle (SIV) holdings.” Other local banks also wrote off smaller amounts.
In the aforementioned Globes article Fischer also said, “Also the banks applied responsible credit policies.” Really? Is loaning money to the wealthiest ten families so that they can spend billions of dollars on international real estate, at the height of the real estate bubble, called responsible lending?
Shouldn’t the central bank head come clean with the Israeli public?
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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
