ISRAEL Law and Practice Contributed by: Shiri Shaham, Yuval Shalheveth, Aviad Lachmanovitch and Asher Bichoonski, Arnon, Tadmor-Levy
Arnon, Tadmor-Levy Azrieli Center Menachem Begin Rd. 132 Tel Aviv Israel
Tel: +972 3 608 7777 Fax: +972 3 608 7724 Email: info@arnontl.com Web: arnontl.com
1. Loan Market Overview 1.1 The Regulatory Environment and Economic Background The following factors impact the trends and direction of the loan market in Israel. • The continued high level of interest rates. • The political and economic effects of the ongo- ing war in Gaza between Israel and Hamas, also involving other countries such as Iran, Lebanon, Syria and Yemen. • A decrease in the involvement of foreign partici- pants in the Israeli lending market. • Increased participation of non-banking lenders and ongoing co-operation among banking and non- banking lenders. • Concerns regarding the volume and high lever- age ratios of borrowers, particularly in residential mortgages. Despite pessimistic economic forecasts and the cur- rent political situation, the number of insolvencies and restructurings has not increased substantially to date, despite a slowdown in growth and other economic factors. 1.2 Impact of Global Conflicts Israel is affected by regional conflicts with Gaza, Iran, Yemen and others. There are also concerns regard- ing possible future seclusion of Israel from certain financial markets, especially in the EU. Israel is also indirectly affected by the continued sanctions against Russia and the sanctions imposed on Russian play-
ers. Thus far, the impact of these conflicts over Israel’s economy and loan market is contained. 1.3 The High-Yield Market The high-yield market in Israel is relatively small and has not changed significantly in recent years. As a result, this market has not had a substantial influence on the financing terms and structures in Israel. Recently, the Israeli government published a legisla- tive proposal to regulate securitisation transactions. This proposed legislation covers a relatively narrow scope of transactions, and the legislative process is expected to take at least one to two years. Moreover, the proposed legislation is intended to regulate such transactions in a manner which will allow them and not block them. Therefore, the impact of this initiative on financing structures remains unclear. 1.4 Alternative Credit Providers The role and market share of non-banking lenders, including institutional investors (such as insurance companies and pension funds) and private lend- ers have increased over time and continue to grow. Additionally, there is increasing co-operation between banking and non-banking lenders, including through syndicated lending, joint marketing and sale of credit portfolios, typically involving the purchase of loan portfolios by banks and institutional investors from private lenders. The role of non-banking credit providers is evident and substantial in certain markets, eg, BNPL transac- tions, car sale loans and mezzanine loans to entrepre-
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