| COUNTRY PERSPECTIVES
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ISRAEL |
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Finance & banking system |
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Israel’s banking system is quite similar to that of the developed countries of Europe or America, backed up by a relatively sound public and private banking environment and independent financial and monetary regulatory bodies. |
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Finance & banking system |
There were 34 banking establishments operating in Israel at the end of 2005, including 18 merchant banks, six mortgage financial institutions, five investment banks, two joint service companies and three foreign banks.
Five large bank holding companies - Hapaolim, Leumi, Discount Bank, Mizrahi and Bein Leumi (the First International Bank of Israel) - control 94 percent of the market and their net income is estimated at 6.7 billion shekels (1.2 billion Euros), 30 percent more than in 2004.
In accordance with Israeli commitments to the General Agreement on Trade in Services (GATS), the right to enter the banking market is free of restriction. Nevertheless, in practice, there are few foreign banks in Israel and the few that exist are limited to representational offices: Citibank, HSBC, the Standard Chartered Bank and (since the beginning of 2006) BNP-Paribas working through subsidiary companies.
Privatisation and the move to mergers and acquisitions are other major aspects of reform of banking structure. The State has sold almost all its shares in the Hapoalim Ltd Bank and a portion of its shares in Israel Discount Bank Ltd. The State holds just 28.3 percent of capital in the Leumi Ltd Bank. In January 2005, the Mizrahi and Tefahot banks merged, becoming the number one bank in Israel for mortgage loans.
In addition to privatisation of State holdings, several reforms were carried out in the nineties to bring Israeli banking up to international standards and to avoid risks related to the formation of conglomerates. Banks must maintain the minimum ratio of equity capital (9 percent) in accordance with the international standards enacted in Basle II.
Liberalisation of the foreign exchange market was consolidated in 2003 and all transactions in foreign currency between private individuals and resident or non-resident companies are now allowed.
Institutional investors and other financial services are well developed. In August 2005, 627 reserve funds (for severance pay, advanced study, and other purposes) were active, with total assets of NIS 227 billion. The overall assets of pension funds amounted to NIS 183.4 billion in August 2005 and the number of mutual funds came to 860, managed by 41 mutual fund management firms. Assets were worth NIS 133 billion in October 2005.
Money market profits on the modern Tel Aviv Stock Exchange (TASE) - a mature market of financial actors specialised in venture capital (thanks in particular to the Yozma programme launched in 1996) and composed of 10 investments funds - came to some US$ 20 million, used as a catalyst for venture capital. The most important indexes are the TA25 and the TA100 (canvassing the 25 and 100 most highly capitalised companies) as well as the Tel-Tech index for technology stocks.
The Israeli stock market registered several records in 2005 and it is one of the least volatile emerging markets. In 2005, 584 companies were traded, representing market capitalisation of US$ 122.6 billion (stocks only). On 5 January 2006, the market hit record high turnover of US$ 947 million and the TA-25 index posted record high trading volume of 790 thousand units. 1,185 securities were traded on the TASE and securities indexes increased by 20 percent. Foreign holdings reached a record US$ 2.1 billion in 2005 (11 percent of the market), according to the TASE 2005 annual report. |
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