Bank Supervisor: Banks can absorb a 30 percent drop in housing prices

Bank Supervisor Dani Kachyashvili said in an interview that despite the increased risk in the real estate market, the banking system can absorb even a 30 percent drop in housing prices, and called to reconsider wage restrictions in banks.

According to Kachyashvili, oversight is following closely the housing market, which is a significant part of bank credit, including the inventory of unsold apartments standing at 85,000. He noted that credit to project developers has grown significantly in recent years, and that financing operators known as 20/80 arrangements are also increasing credit. 'As I said, risk has increased but banking can absorb even a 30 percent drop in housing prices,' he said.

The supervisor called to reconsider wage restrictions in banks, which he said were set many years ago, and warned that too wide a gap compared to the private sector 'could create a problem in recruiting suitable personnel, and could draw out talented talent.' He said it is a matter of Knesset legislation, and he assumes the issue will be raised in the next Knesset.

On bank profitability, he said it is high compared to previous years, and is explained by growth in economic activity, growth in credit, bank efficiency improvements and the relatively high volume of non-interest-bearing funds in checking accounts. However, he said oversight opposed sectoral taxation on bank profits.

He also said oversight supported banks being able to sell insurance products and capital market products. Regarding relations with Palestinian banks, which Workers and Discount Bank sought to sever over a decade ago, he said that 'as of today there is no alternative' and that 'at this stage the threat has been removed pending the establishment of a permanent framework.'