IMF Spurs Last-Minute Objections to Israel’s Banking Reforms

  • Senior minister echoes IMF concerns of potential credit crisis
  • Lawmakers planning to submit reforms to vote within month

Just as Israel is close to legislating major reforms to the banking industry, critical voices are starting to mount.

A cabinet member echoed concerns of a credit crisis raised by the International Monetary Fund, days after the organization said certain points of the government’s proposal contradict the lessons of the last financial crisis.

"I would not ignore the criticism by the IMF, which had no axe to grind," according to Yuval Steinitz, a former finance minister and member of the coalition government. "I would suggest devoting a few weeks now to serious study of this criticism to see whether there are remedies that can moderate these risks, and to understand how to make a reform that takes this concern and anxiety into account."

The criticism comes as the government works to submit its plan -- which calls for the introduction of new lenders and forced asset sales -- to a parliamentary vote within a month. Finance Minister Moshe Kahlon, who’s spearheading the initiative, has made increasing competition between banks a cornerstone issue in his campaign to lower living costs. The banks say the panel’s recommendations are based on outdated information and threaten the country’s financial stability.

"The government will study the IMF’s critique and there could be some changes here and there, but not to the essence of the reform," said Meir Slater, head of research at Bank of Jerusalem Ltd. "Kahlon is very determined to pass this, since he was elected on his promises to take on the banks and lower housing prices. And he’s not making much progress on housing."

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