Israeli Banking Supervisor: Banks Can Withstand 30% Housing Price Drop

The Supervisor of Banks in Israel, Dani Hachiyashwili, stated in an interview with Walla that Israeli banks possess the resilience to absorb a significant decline of up to 30% in housing prices. This assessment comes amid concerns about the real estate market, where unsold inventory has reached 85,000 units, leading to increased credit needs for contractors. Hachiyashwili noted that while the risk in the real estate sector has risen, the banking system is well-equipped to handle such a downturn.

He also addressed the high profitability of the banking system, attributing it to increased economic activity, credit growth, and operational efficiencies, even before recent interest rate hikes. Hachiyashwili expressed opposition to sector-specific taxation on bank profits, arguing it could hinder new entrants and complicate calculations, despite a temporary special tax that has been extended beyond its initial one-time commitment.

Furthermore, the Supervisor discussed potential regulatory changes, including a re-evaluation of salary limitations for bank employees, which he believes are outdated and hinder talent acquisition compared to the private sector. He also supports expanding the permissible activities for banks, suggesting they should be allowed to offer a wider range of financial products, including savings certificates, and that financial holding companies should have increased investment opportunities in smaller banks.

Regarding the request by Israeli banks to sever ties with Palestinian banks, Hachiyashwili acknowledged the operational burden and risk involved. He confirmed that while banks like Hapoalim and Discount had sought to end these correspondent relationships years ago, the state had committed to providing an alternative, which has yet to materialize, leaving the issue unresolved for now.