Fischer: Supervision of banks must be tightened

“We must prepare for the day in which there will be banks with no controlling core,” says Bank of Israel governor.

November 17, 2011 05:52
1 minute read.
Bank of Israel Governor Stanley Fischer

Stanley Fischer 311 R. (photo credit: REUTERS/Baz Ratner)

Banks supervision must be tightened to safeguard against potential future damage to the banking system, Bank of Israel Governor Stanley Fischer told the Knesset Finance Committee Wednesday.

The committee was discussing an amendment to the Marani Law in the Banking Ordinance, which aims to resolve the issue of who controls a commercial bank without a controlling share. Fischer said the bill would protect against scenarios in which an individual or group gains control of a bank through its directorate, without receiving the central bank’s approval.

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“We must prepare for the day in which there will be banks with no controlling core,” he said, adding: “The collapse of a big bank will cause great damage by forcing massive expenditure, therefore everything must be done to prevent such a situation.

“Until [the global financial crisis of] 2007 to 2008 we thought this was only a theoretical discussion, but after what happened in the United States and in Europe we were proven wrong.”

Fischer reiterated comments he made in a press conference on Tuesday that the Israeli economy was not at risk of a recession, but a crisis in Europe would still have a damaging effect on Israel – both at the financial and nonfinancial levels.

“If European banks crash, that will affect us too,” he said. “The financial climate will be a lot worse, and we’ll be a lot less optimistic. It could happen.”

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