Israel in no danger of market collapse, regulators say

The country’s economy is in a relatively strong position thanks to low unemployment and a balanced and stable budget.

By NADAV SHEMER
August 17, 2011 07:17
1 minute read.
Tel Aviv Stock Exchange

Tel Aviv Stock Exchange TASE 311 (R). (photo credit: Gil Cohen Magen / Reuters)

 
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The Israeli markets and banking system are in no danger of suffering collapse, even in the current economic environment, regulators said at a special Knesset Finance Committee discussion Tuesday.

Israel will not escape unaffected if the American and European debt crises worsen, Israel Securities Authority Chairman Shmuel Hauser told the committee, but the country’s economy is in a relatively strong position thanks to low unemployment and a balanced and stable budget.

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“We must be mindful of the strong [market] fluctuations of the past few weeks, which teach us that we are vulnerable,” he said. “However, there is still no reason for panic. Currently there is no risk that one tycoon or another will bring down the market or negatively affect pension savings.”

Supervisor of Banks David Zaken said Israel’s financial system was completely stable, whether measured by capital-adequacy ratios, bank reserves or accounting liquidity.

However, like Hauser, he warned: “Something is happening in Europe and the United States and there are expectations of a market slowdown, and at some stage that will also impact Israel as an exporter to those markets. Such an impact will be longterm.

There won’t be an immediate impact such as a collapse, but this will impact the banking system’s performance for quite some time.”

Prof. Oded Sarig, who is responsible for capital markets in the Finance Ministry, hinted that he is working on new draft regulations that will strengthen supervision and enforcement of laws governing financial institutions.



Finance Committee member MK Faina Kirschenbaum (Israel Beiteinu) said she had initiated the discussion because even though the Israeli economy has been stable in the face of global troubles, “we must not be complacent.”

“The public must know that if a crisis does occur, we are working to stabilize the system and to prevent their savings from taking a hit,” she said.

“We must worry about the pensions of those who will enter retirement in another two years, and not just of those who will retire in 20 years, because by then the market will correct itself.”

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