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The Banking and Finance
Sector Presents:
Wind of Change
The financial sector in Israel includes a wide variety of participants, dominated by the
Israeli banks. The Israeli banking sector is highly concentrated, comprising five banking
groups controlling approximately 94% of the entire Israeli banking credit, with the two
largest banking groups holding approximately 60%of the entire banking sector’s assets.
Alongside the banks, the financial sector also includes "institutional investors," mainly,
insurance groups, provident and pension funds and also – principally with respect to
traded credit instruments - mutual funds. Over the last decade, the volume of credit
provided by institutional investors has been constantly increasing, the result of major
governmental led structural reforms in the financial sector.
Thegrowing impact and largermarket shareof institutional investors led toa strengthened
regulatory framework applicable to those entities. In the past few years, several
committees have been appointed by the regulators, with laws and regulations enacted to
create an extensive regulatory framework relating to institutional investors’ investment in
non-governmental bonds,tailormade credit facilities,actions in case of debt restructuring
and providing credit to entities previously subject to such proceedings.
This regulatory framework addresses different aspects of the credit process - from
limitations on the types of credit in which the institutional investors are entitled to
engage, through to the content of the agreements between the parties in credit
transactions, to structural matters relating to the day-to-day management of credit by
the institutional investors.
However, the contribution of the institutional investors to the financial market is
reflected in the growing competitiveness of the credit market for the large businesses
sector, while in the small and medium-sized enterprises (SMEs) and consumer loans'
sectors the banks remain dominant, with a market share of approximately 90%. Other
participants in those markets are non-bank lending entities, specializing in certain types
of credit (such as factoring and discount services, short terms loan facilities (provided
also by credit card issuers and P2P platforms), some apply to SMEs and some (mostly
those using virtual platforms) apply to consumers. During the past year, regulatory
Over the last decade, the volume of credit provided by institutional investors
has been constantly increasing, the result of major governmental led structural
reforms in the financial sector.