"We're concerned mortgage risk assessment is wrong"

"We are very worried about mortgages," said Supervisor of Banks David Zaken at the "Globes"-BDO Ziv Haft Capital Markets Conference in Tel Aviv today. "You have to take an overview of this issue. If you look at the banks' balance sheets, at the credit given to contractors and the financing of the industry, you reach 40% of the credit in the banking system is for mortgages and housing. Foreign experience shows that crises happen, and sometimes begin in the housing market, and that is our main concern."

"Our concern is that the risk assessment on mortgages is wrong," warned Zaken "Everything looks great on the graphs, but the question if this is forward-looking risk - we're not sure. That is why we took the steps that we did. It's necessary to reduce the risk to borrowers and the banking system."

Commenting on debt settlements, Zaken said, "Some of the criticism against the debt settlement with Nochi Dankner is justified, but the criticism should not only focus on the debt settlement, but also on credit allocation issues. It should be remembered that a debt settlement is part of the credit management story. A debt settlement is designed to manage risk, when there is no sure way of repaying the debt.

"The problem is the multiplication of debt settlements. This multiplication harms lenders and could undermine their financial stability. It can also cause a loss of confidence by the public in the people who manage its money. The debt settlements committee will try to deal with these problems."

Zaken added, "The bank's business is to grant credit, which is how they make their living. If the criticism leads to tougher terms and a gradual tightening of loans, the criticism is constructive, but what if the criticism results in a credit crunch? I don�t see that happening."

As for the distribution of credit between big and small businesses, Zaken said, "We've already raised the issue of small businesses and their profitability. As far as we are concerned, under Basel rules, they are weighted at a lower ratio compared with big businesses. I think that the banks have taken steps to increase credit to small businesses, and have put their problems on the agenda."

Published by Globes [online], Israel business news - www.globes-online.com - on May 20, 2013

"We're concerned mortgage risk assessment is wrong"

Supervisor of Banks David Zaken told the Globes-BDO Ziv Haft Capital Markets Conference that risks must be reduced.