Israel's purchasing power eroding
Shmuel Ben-Arie of Pioneer Financial Planning: Frenkel previously worked well with Prime Minister Benjamin Netanyahu.
"Investors and capital market players in Israel and around the world will greet the appointment of Jacob Frenkel as the governor of the Bank of Israel with a sigh of relief. I therefore believe that both the stock market and the bond market will welcome the decision, but it should be remembered that the bond market is more influenced these days by US bond yields than by the appointment of the old-new governor," says Pioneer Financial Planning local market research manager Shmuel Ben-Arie.
"For local investors, the appointment will be welcomed, since Frenkel previously worked well with Prime Minister Benjamin Netanyahu, and because at the end of his previous term of governor of the Bank of Israel, it was obvious to everyone that he had been one of Israel's successful and best governors. For foreign investors and capital market players, too, this is a calming and promising appointment. Frenkel was the economic counselor and director of research at the IMF even before he served as governor of the Bank of Israel, earned the praise of the major industrialized countries, and played a significant role in the construction of the international monetary system," says Ben-Arie.
Ben-Arie points out, however, that "Prof. Frenkel served in a senior position at AIG when it collapsed, after it assumed too much risk in the derivatives and real estate markets, and was nationalized by the US government. In effect, the US taxpayer paid for its mistakes. There is almost no question that this stain from his past will come up again and again. Nonetheless, I believe that Prof. Frenkel has the skills and experience needed for the job, and he will not need a long overlap period."
Prof. Elise Brezis, the director of the Aharon Meir Center for Banking at Bar Ilan University and a former advisor at the Bank of Israel, says, "This is good news for the Israeli economy. When he served as governor, Frenkel showed that he was ready to take bold decisions. He led the liberalization of the financial system, and took a series of measures which made the Israeli capital market more open to the world. Frenkel, as he has proven in the past, is an assertive man who is not afraid of big changes, and when we have a green finance minister, this is a helpful move. Frenkel knows the rules of the game well, he won't hesitate to influence Ministry of Finance policy. And if we're talking about his past, it can be said of his time at AIG that once bitten, twice shy, and this is exactly what will enable him to be tough with Israeli banking. The only thing which can be held against him is that executive pay in the financial system and inequality in Israel are not the kind of things that will be on his agenda."
Ayalon Group chief strategist Yaniv Pagot says, "This is an unexpected appointment by Prime Minister Benjamin Netanyahu, who seems to have made every effort to import a big economic name with an international flavor. When his efforts failed, he decided to appoint to the job Prof. Jacob Frenkel, who meets this criterion, but who is not a problem-free appointee."
Pagot warns of the negative consequences of the appointment, saying, "Frenkel's appointment creates great uncertainty about the future of Deputy Governor of the Bank of Israel Karnit Flug, because it indicates a lack of confidence on the part of the prime minister in her ability to lead the central bank. Barry Topf, Fischer's buyer of foreign currency, is leaving his post this year, as is Bank of Israel spokesman Yossi Saadon. This means that Frenkel faces a management task of establishing a new, fresh, and elite team around him. Frenkel will have to work harmoniously with the Monetary Committee that Fischer has bequeathed him, and which did not exist the last time that Frenkel was governor. This is not an easy challenge, and is liable in certain circumstances to cause initial friction.
"The Bank of Israel's foreign currency reserves are close to $80 billion, and it is not clear whether the old-new governor will act as his predecessor did and will protect Israeli exports against an aggressive strengthening of the shekel," adds Pagot.
Pagot concludes, "Another major challenge facing Frenkel will be to help the government to deflate the housing bubble and prevent damage to the financial system. The Bank of Israel under Fischer gave up trying to cool the housing market, and has passed this hot potato to the government, which is dragging its feet on the matter."
Published by Globes [online], Israel business news - www.globes-online.com - on June 24, 2013
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013
You comment was recieved and soon will be published.
Load more comments
Prices in Israel were 13% above the OECD average in 2013.
Record tourism in February
There were 244,000 visitor entries in February 2014, 5% more than in February 2013.
BoI: Home price rise risk has moderated
The interest rate cut for March was a 4-1 majority decision.
Gov't set to approve Israel-US tax pact
The economic social cabinet will soon approve the information sharing agreement with the US IRS.
Netanyahu: We won't abandon housing front
The prime minister promises to be as active on economic as on diplomatic problems.
Budget deficit lowest since August 2011
Tax collection rose 15% in February as the deficit fell to 2.7% of GDP.
2013 Knesset record for 'communications': NIS 71,908
Shas MK Avraham Michaeli was top; prime minister and finance minister spent low.
Average salary up slightly in 2013
The average monthly salary rose by only 1.1% after adjustments for purchasing power.
"Home prices driving tech workers overseas"
Leumi deputy CEO Daniel Tsiddon: The rise in home prices in high-tech areas in Israel is costing human capital.
IEC reform talks break down
The stumbling block was the workers' demand for an amnesty on salary excesses.
Flug reopens tussle over financial regulator
The Finance Ministry opposes Flug heading the new committee to supervise the financial system.
Charity begins at home in Israel
Individuals provide 71% of total charitable donations, companies 27%, and estates 2%.
Azrieli to fund Technion Tel Aviv campus
The campus will be called "Technion Campus in Sarona named for Azrieli."
18 Israelis make "Forbes" 2014 Billionaires List
Eyal Ofer is the richest Israeli followed by Idan Ofer and Stef Wertheimer.
BoI: Regional inequality up 84%
The Bank of Israel found the income gap between the center and the periphery is rising sharply.
US removes Israel from IP blacklist
Israel passed new legislation strengthening intellectual property rights on brand drugs.
Stanley Fischer slammed by BoI Governor predecessor
David Klein attributes most of Fischer's mistakes to "the American reality from which he drew much inspiration."
Bank of Israel releases samples of new NIS 50 note
The new NIS 50 banknote is green, bears a picture of the author Shaul Tchernichovsky.
"You can't teach entrepreneurship"
Angel investor Zohar Gilon relies on his own judgement rather than due diligence when selecting investments.
If Rose Fostanes played basketball
Reforms in regulations for foreign caregivers are welcome, but don't go far enough.
Antitrust Authority disappoints on gas competition
The only new company that will compete against Tamar and Leviathan will own less than 8% of Israel's proven gas reserves.
When innovation means a refrigerator
Jamshyd Godrej believes economic development in India must go hand in hand with environmental and social awareness.
Prof. Zvi Eckstein supports NIS 3.30-3.40/$ floor rate
The former deputy Bank of Israel Governor is the first senior figure from the financial system to advocate a floor rate.
2013 boom year for Israeli high-tech
In the first half of the year, there was a 52% rise in demand for mobile and web developers, and salaries are up as well.
Strong shekel forces Israeli manufacturers abroad
Israeli manufacturers tell "Globes" they are losing money due to the current strength of the shekel.
"Ending QE3 will harm the economy"
Prof. Richard Clarida will tell "Globes" Israel Business Conference that the main risk to the US economy is its political system.
Israel offers favorable tax regime for companies
"Globes" and Baker Tilly Israel accountants found Israel's tax benefits are among the most attractive in the West.
Slowdown will worsen
The vested interests that continue to claim that the economy is improving are deceiving the public, says Eyal Horowitz.
Can the US maintain growth after QE3?
Leading economists will discuss "The US: catch 22 the zero interest rate" at the "Globes" 2013 Israel Business Conference.