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Even that bastion of capitalism, the United States, is nationalizing banks as the financial crisis spreads worldwide. Governments in Europe blazed the trail, injecting liquidity into the cash-strapped financial system in the hope of averting a slide to global depression. Here too, the possibility of a state bailout is taking hold. But the Israeli model is a different one.

Policy shapers at the Bank of Israel, led by Governor Stanley Fischer; at the Israel Securities Authority, chaired by Zohar Goshen; and at the treasury, under Finance Minister Roni Bar-On, are in no rush to nationalize Israel's banks in some unthinking imitation of the global trend. At the moment it's a contingency plan that the regulators agree shouldn't be executed unless a credit crunch materializes here too. They are rather expecting that one will.

A team of officials from the Bank of Israel, the Israel Securities Authority and the Finance Ministry has been discussing solutions for if and when the banks freeze lending. The Finance Ministry suggests that the state simply guarantee loans extended by the banks. The Securities Authority hates that idea, and proposes that the state inject liquidity.

The authority's proposal calls for the government providing NIS 6 billion. Under current rules that sum would enable the banks to tap the markets for another NIS 3 billion. The NIS 9 billion total amount would enable the banks to reach the financial ratio they need (again, under the rules) to lend up to NIS 80 billion. (In Israel, banks must maintain a capital adequacy ratio of 12%. This means that for every NIS 100 million a bank lends it must have NIS 12 million in shareholders equity.)

That NIS 6 billion is money the banks would have to repay one day. If they fail to do so, according to the Securities Authority proposal, the state would receive shares in the banks instead. In short, if the banks don't repay Jerusalem seizes control.

That model differs from the British and American models, in which the respective governments are actually buying shares in the banks. The Israeli model would only nationalize the banks if they fail to repay the loan.

Israel's economic leaders are preparing for the eventuality that major Israeli borrowers will fail to raise the money they need to repay or roll over their gargantuan loans.

Both plans, that of the Securities Authority and of the Finance Ministry, ultimately aim to directly improve the banks' lending ability, helping their clients (and the banks) to weather this stormy period in peace.

Banks overseas have already tightened up or halted lending, leading governments from Iceland to Washington to inject money, hoping to stop the markets from seizing up entirely. Over here, Israel's economic leaders are expecting the credit crunch to hit in 2009, following a number of developments.

One is that Israel's companies borrowed hugely from the public during the boom years, through bond offerings, and will have to recycle their debt (or repay). In 2009 alone some NIS 12 billion worth of corporate bonds come due, and in 2010 the figure leaps to NIS 60 billion. The companies are unlikely to be able to borrow more money on the capital market to repay their bondholders and will need to borrow from the banks, market sources forecast.

Altogether, the public has lent corporate Israel some NIS 350 billion.

A second reason is that the banks are limited in their ability to extend new loans. The Bank of Israel demands, as said, that they achieve a capital adequacy ratio of 12% by the end of 2009. (At present the banking system's ratio is 11.6%).

A third factor is the expectation that companies hurting from the global slowdown will start defaulting on their debts to the banks. The banks will have to increase their provisions for doubtful debt and their own profits will suffer.

Another idea taking shape among the economic leadership is to create "rescue funds" for the provident and mutual funds, insurance companies and pension funds that gorged on corporate bonds and face a hammering if the companies start to default on repayments.

When a bank extends a loan, it alone takes the risk. (Let's leave derivatives out of it). When a company issues bonds and the public lends it money, the risk is dispersed, or put otherwise - shared. The idea being proposed is to create "credit officers" who would operate alongside the bonds' trustees and handle debt collection for all the institutional investors that bought the company's bonds.