ISRAEL Law and Practice Contributed by: Shiri Shaham, Yuval Shalheveth, Aviad Lachmanovitch and Asher Bichoonski, Arnon, Tadmor-Levy
neurs in the real estate market (especially in the urban renewal market). Their role is currently less noticeable in the market for mortgages for residential apartments. Non-banking lenders also utilise fintech solutions to market loans to consumers. The law also allows for the extension of credit through P2P platforms but, although a few entities attained such licence and operate such platforms, their market share and impact is currently insignificant. 1.5 Banking and Finance Techniques The use of advanced finance techniques, includ- ing HoldCo structures and preferred equity, is more prevalent among foreign lenders, particularly in ven- ture lending. Such techniques are also common in the sale and securitisation of credit portfolios, even before the finalisation of the securitisation legislation. Securitisation often involves the formation of special purpose vehicles (SPVs), but sometimes a contractual CLN/non-recourse mechanism is used instead of SPV structures. The use of derivatives as an alternative to secured lending is becoming more common, although the use of credit default swaps (CDS) in Israel remains rela- tively low. Foreign acquirers of Israeli companies frequently use holding company (HoldCo) structures, which are familiar from other jurisdictions and facilitate the rais- ing of acquisition finance from overseas lenders. 1.6 ESG/Sustainability-Linked Lending ESG-related considerations are increasingly dis- cussed and there is a growing perception that ESG is becoming more and more important in Israel. However, the actual impact remains relatively minor and implementation is still partial, although both are expected to increase in the forthcoming future. In projects involving European participants the impact is more significant as such participants implement the standards applicable to them. The Israeli government supports a loan fund that includes a sustainable energy track, further highlight- ing the growing emphasis on “green” finance and potentially accelerating the implementation of ESG
in finance. There are also discussions about imple- menting carbon fines and rewards, which may further enhance the effect of ESG. 2. Authorisation 2.1 Providing Financing to a Company Requirements vary according to the classification of credit providers. • Banks – the licensing of banks is stringent and demands significant capital investment and com- pliance with comprehensive regulatory require- ments. The Bank of Israel recently published a plan to lower these requirements for smaller size banks or to banks with limited scope of services. Due to these requirements, there have been no material changes to the banking sector and market over the last few decades. During the last five years, two new banks received a banking licence, after four decades in which no new licence was granted. Nonetheless, the said new banks are digital banks with relatively limited scope of services, and they currently have little influence over the banking market. • Institutional investors – the licensing of insur- ance companies and pension and provident funds is also stringent and requires significant capital investment and compliance with comprehensive regulatory requirements. During the last dec- ade, the regulator expanded the types of lending activities that institutional investors are allowed to engage in, but did not change the conditions for authorisation of such institutional investors. • Private lenders – private credit providers engag- ing in the provision of credit in Israel are subject to licensing requirements, which are less stringent than those applicable to banks and institutional investors. Since the licence requirements came into force, more than 800 entities obtained a basic credit licence, which allows such credit providers to extend credit up to ILS25 million, and more than 200 entities received an extended credit licence, which allows such credit providers to extend an unlimited number and volume of loans. • P2P platforms – operators of platforms for the extension of credit in a P2P model, where the
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