The international credit rating agencies Moody's and Fitch are considering opening their first offices in Israel which would rate credit liabilities of banks, insurance companies and large public firms.
Representatives of the two agencies have been meeting recently with senior players in the Israeli economy to check out the potential. They met the Finance Ministry's supervisor for the capital markets, insurance and savings Eyal Ben-Chelouche. His recognition of the agencies' local offices would be required if their reports were to be used by local institutions.
The agencies' interest in the Israeli market comes at an opportune time, when the local banks are suffering from a capital crunch. They cannot extend their credit lines while their shareholders refuse to stump up extra funding. Overseas, this problem is usually overcome through the sale of credit portfolios and the issue of bonds. This is the speciality line of business that the credit rating agencies serve.
An additional factor, that may have influenced the decision of Moody's and Fitch to explore the local opportunities, is the collapse this year of Trade Bank and the Industrial Development Bank. The experiences of these two - one an exceptional case of embezzlement on a grand scale, and the other, the impending fear of a run on the bank - caused local companies to be wary of depositing funds in small banks, preferring to deposit in the larger banks or even in foreign banks with high credit ratings.
In addition, recent amendments to regulations concerning pension funds and insurance companies provide further cause for such institutions to invest in assets with higher credit ratings.
Ben-Chelouche confirmed that certain "leading international credit rating agencies" had expressed an interest in setting up local branches but would not divulge their names. He agreed that there were mitigating circumstances that made conditions ripe in Israel for setting up such branches. "It shows a maturity of the Israel capital market and the great faith that these parties have in the Israeli financial system," he said. The treasury had acted to improve liquidity of the markets, he added, stressing that developing the secondary debt market was very important.
Currently the only rating agnecy in Israel is Maalot, owned by the large banks, the Association of Stock Exchange Members, the Life Insurance Companies Association and Ilanot Betuchah. Maalot has a joint working arrangement with the international credit rating agency Standard & Poor's.
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