Bank Supervisor: Banks Can Absorb 30% Housing Price Decline

Bank Supervisor Dany Khachashvili said in an interview that despite the increase in risk in the real estate market, the banking system can absorb even a 30% decline in housing prices, and called for reconsideration of bank salary limits.

According to Khachashvili, the regulator is closely monitoring 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 operations called 20/80 are also increasing credit. 'As mentioned, the risk has risen but banking can absorb even a decline of 30% in housing prices,' he said.

The supervisor called for reconsideration of bank salary limits, which he said were set many years ago, and warned that too large a gap compared to the private sector 'could create a problem in recruiting suitable personnel, and could attract talented personnel away.' He said it is a matter of Knesset legislation, and he assumes the issue will come up in the next Knesset.

Regarding bank profitability, he said it is high compared to previous years, and is explained by growth in economic activity, credit growth, bank efficiency and the relatively high volume of non-interest-bearing funds in checking accounts. However, according to him, the regulator opposed sector-specific taxation on bank profits.

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