The Bank of Israel(BOI) has surprised market players by lowering rates by 0.5% down to 2.5%. This is the lowest interest rate level ever in Israeli history. This means that you will pay less on overdrafts, and conceptually, get better loan terms at your bank. Whether the banks start granting loans is anyone's guess. On the other hand interest that you will receive on your bank deposits or on Israeli government bonds will drop.
The BOI must feel that with limited inflation risk, and the economy showing signs of zero growth, they need to do whatever it takes in order to jump start the economy. Now if the governement would only cut taxes!
Showing posts with label Bank of israel. Show all posts
Showing posts with label Bank of israel. Show all posts
Monday, November 24, 2008
Tuesday, November 11, 2008
US Dollar Surges on Bank of Israel Rate Cut
In a surprise move, Bank of Israel governor Stanley Fischer cut interest rates to 3%. Citing increasing challenges to the local economy and even a potential recession (maybe he read some of my posts!), Fischer made the unexpected move in order to help stem the economic slide.
With analysts lowering their '09 growth forecasts, Fischer who has until last week remained unrealistically optimistic, appears to have thrown in the towel an admitted that things aren't all that rosy, and is trying to add liquidity to the Israeli banking system to try and prevent the same type of credit crisis gripping the global banking system .
As a result of the cut, the US Dollar soared almost 2% against the Shekel. For consumers the rate cut is helpful. It will mean lower rates that you need to pay on overdraft, lower rates for loans and other types of credit. On the other hand, investors in Israeli bonds will receive less interest on their investment.
With analysts lowering their '09 growth forecasts, Fischer who has until last week remained unrealistically optimistic, appears to have thrown in the towel an admitted that things aren't all that rosy, and is trying to add liquidity to the Israeli banking system to try and prevent the same type of credit crisis gripping the global banking system .
As a result of the cut, the US Dollar soared almost 2% against the Shekel. For consumers the rate cut is helpful. It will mean lower rates that you need to pay on overdraft, lower rates for loans and other types of credit. On the other hand, investors in Israeli bonds will receive less interest on their investment.
Thursday, November 6, 2008
Credit Crunch and Israeli Banks
Stanley Fischer, Governor of the Bank of Israel, spoke yesterday on the stability of the Israeli banking system. Fischer, along with many other public figures has gone out of his way to keep telling the public that the local banking system is sound. While scaring the public about bank failures is irresponsible, don’t Israelis deserve to be told the truth about what is going on? How about a little honesty from our leaders.
If everything is so rosy, then why does the BOI have a plan to stream money to the local banks in the event of a credit freeze? Is this prudent planning, or cause for worry?
As reported in Globes, Fischer spoke about how disciplined the local Israeli banks have been. “In addition, Israel’s banks had no sub-prime exposure. “Israel’s banks said ‘No’ to this paper,” said Fischer.”
Really? That’s not how I remember it. Bank in March Bank Hapoalim wrote off hundreds of millions of dollars. According to Reuters, “Hapoalim, whose shares have slid some 30 percent so far in 2008, said it posted impairments of 1.18 billion shekels, or $334 million, for its U.S. asset-backed securities portfolio. It had previously said it would write off around $300 million in the fourth quarter due to a decline in the value of its U.S. structured investment vehicle (SIV) holdings.” Other local banks also wrote off smaller amounts.
In the aforementioned Globes article Fischer also said, “Also the banks applied responsible credit policies.” Really? Is loaning money to the wealthiest ten families so that they can spend billions of dollars on international real estate, at the height of the real estate bubble, called responsible lending?
Shouldn’t the central bank head come clean with the Israeli public?
If everything is so rosy, then why does the BOI have a plan to stream money to the local banks in the event of a credit freeze? Is this prudent planning, or cause for worry?
As reported in Globes, Fischer spoke about how disciplined the local Israeli banks have been. “In addition, Israel’s banks had no sub-prime exposure. “Israel’s banks said ‘No’ to this paper,” said Fischer.”
Really? That’s not how I remember it. Bank in March Bank Hapoalim wrote off hundreds of millions of dollars. According to Reuters, “Hapoalim, whose shares have slid some 30 percent so far in 2008, said it posted impairments of 1.18 billion shekels, or $334 million, for its U.S. asset-backed securities portfolio. It had previously said it would write off around $300 million in the fourth quarter due to a decline in the value of its U.S. structured investment vehicle (SIV) holdings.” Other local banks also wrote off smaller amounts.
In the aforementioned Globes article Fischer also said, “Also the banks applied responsible credit policies.” Really? Is loaning money to the wealthiest ten families so that they can spend billions of dollars on international real estate, at the height of the real estate bubble, called responsible lending?
Shouldn’t the central bank head come clean with the Israeli public?
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