1. Professor Zvi Eckstein Deputy Governor of the Bank of Israel
Israel’s Capital Market Reforms – Achievements and Challenges Ahead
Professor Zvi Eckstein
Deputy Governor of the Bank of Israel
Feb. 27, 2008

2. The Structural Reforms in the Financial System
A gradual process aimed at decreasing the government’s intervention in the economy, integrating the economy into global markets and increasing competitiveness in the domestic economy
Results:
Development of financial markets and sophisticated financial tools
Diversification of the public’s asset portfolio
Increased competition, liquidity and tradability in the markets

3. The Bachar Reform (2005) The primary goal of the reform:
Reducing the concentration in the financial system and the share of the banks in the management of savings and provision of credit
The primary measures of the reform and its results:
Transfer of the management of mutual funds and provident funds to non-bank financial institutions
Increased competition in the management of public savings and the provision of credit.

4. The Banking System and Financial Companies after the Reforms
Supervision:
Increased risks outside of the banking system and increased need for cooperation between supervisory authorities
Competition and efficiency in the financial sector:
Low competition, especially with respect to retail banking
Most of the activity in demand deposits, credit cards, mutual funds, custody of securities and loans is concentrated in the largest two banks
There is a need to develop advanced financial instruments and safe mechanisms for the transfer of funds

5. Increased Competition in the Retail Banking System
Main components:
Commissions Law (2007): reducing the number of commissions by about two-thirds, reducing transfer costs between banks, etc.
Increased competition in banking services:
Marketing of mutual funds on the Internet
Money market funds and money market funds for payments
Establishment of a virtual bank

6. Increased Efficiency and Competition in the Money Markets
Development of a settlement system (ZAHAV-RTGS) and participation in CLS
REPO
Securitization
Market for interest rate futures (Telbor)

7. Thank you!