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schemes is limited. However, there is an increasing interest of institutional lenders to
cooperate,invest or evenacquire such schemes,as they can facilitatea consumer lending
arm for the institutional lenders, who do not benefit from the presence of country-wide
branches and have limited personnel to develop such lending operations. Once the
cooperation of institutional investors and peer to peer lending schemes evolves, the
influence on the market will certainly become more significant.
Another reform that has been supported by media and certain regulators relates to the
separation of credit card companies from the banks. Currently, all credit card companies
in Israel are controlled by banks. Some believe that if the banks are forced to divest their
holdings in the credit card companies, the level of competition in the affected segments
(commercial and consumers segments) will increase. It is not clear if, when and how such
a reform will be carried out. It is also unclear how the credit card companies will finance
their activities after such a separation from the banks, and – as a result – what effect
such a separation will have on the behavior of the relevant market participants.
Real Estate Mortgages
As a result of historically low interest rates, the real estate mortgages market continues
to grow. In order to limit the associated risks, the Bank of Israel imposed limitations and
restrictions on the amounts that can be extended to borrowers, including the limit on
mortgage loans to 50% of the real estate’s purchase price, (in certain conditions, 70-
75%), on the maximum term of the loans to 30 years, (requiring that at least 1/3 of the
loan bears a fixed rate interest), and additional restrictions.
High Yield Lenders
In addition, leverage and investment funds offer high yield loans to relevant borrowers.
These transactions involve mezzanine or other subordinate debt, but also senior loans
where the "traditional" banking financing is not available. A number of funds operate
in Israel, and can provide interesting borrowing opportunities for businesses that face
difficulties in funding their operations through "ordinary" banking loans.
International Banks
Although many international banks have Israeli or Israeli related operations, they have
not entered the popular commercial and consumer segments, and have not therefore
affected competition in these segments. However, international banks are significant
participants in large corporate and infrastructure financing and are involved, both as
arrangers and as participants, in syndicated loans.
Another key field of expertise of international banks has been private banking, including
the set up and operation of representative offices in Israel and other on-shore/off-shore
combinations.
Currency Trade
It is well known that the Bank of Israel is active in the currency markets, aiming to ensure
that the Israeli shekel does not become too strong, which may be detrimental to the
Israeli economy.
Until now, no restrictions have been imposed on currency trade in Israel. Certain
regulation was introduced in 2010 and in 2011, but in essence it imposes disclosure
and reporting obligations, rather than limitations on trade. It is possible, however, that
additional regulation will be introduced in the future in order to protect the shekel from
currency speculation.