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Israel's institutional investors will have to disclose their exposure to the real-estate sector, after years of gorging on debt issued by big (and not so big) real-estate companies. Yesterday Yadin Antebi, the commissioner of capital markets and savings, ordered provident and mutual funds to disclose their holdings in companies owned by the big real-estate companies, citing firms owned by property barons Nochi Dankner, Lev Leviev and Yitzhak Tshuva specifically.

Trading in real-estate stocks has been especially volatile. Yesterday the Real Estate-15 index tumbled by nearly 15%, after a sharp upswing Sunday. From the year's start the index has lost 58%, hence Antebi's concern.

Last week Antebi demanded that the institutionals reveal their precise degree of exposure to overseas investments.

Corporate bonds had been all the rage in recent years. Investors wanted them and companies were happy to comply, preferring to borrow from them rather than from the banks. Real-estate companies are particularly heavy borrowers, to finance construction and investments in Israel and abroad. Many of the real-estate companies that issued debt did so to invest in eastern Europe.

Provident funds soaked up NIS 100 million worth of the paper, liquid and illiquid, spending 40% of managed assets on it. Mutual funds also snapped up corporate debt, as did pension funds and insurance policies. One of the reasons provident funds posted negative returns this month is precisely the slide in the Tel Bond indexes - though yesterday the leading one, the Tel Bond-20, steadied with a loss of "only" 0.6%. The bonds of the big tycoons - Tshuva, Eliezer Fishman, Moti Zisser - also stopped bucking like broncos, with wild sweeps up and down. But yields on their paper remain high, in the region of 10% to 20%.

Antebi very specifically wants to know the degree to which the funds are exposed to the big tycoons. One reason the biggest companies borrowed from the capital market rather than banks is because they had no choice, Antebi pointed out. The banks had already lent the maximum they could under the law, which caps lending to a single borrower as a function of the bank's equity.

But with the credit crunch spreading and worsening, the fear is that the companies won't repay debt, or won't be able to borrow money to recycle debt.

What about the banks' exposure to real estate? One way to measure a bank's risk is to examine the degree of concentration in its loans portfolio. A highly concentrated portfolio means the bank didn't diversify its lending, which worsens risk. Heavy lending to a sector exposes the bank to the risk of a downtrend in that sector.

The Supervisor of Bank's 2007 report (published in July 2008) discusses loan diversification, and makes frightening reading. It says the banks' lending became less diversified in 2007. Financial services and real-estate companies were already heavy borrowers and their weight in the portfolio increased even more in 2007, to constitute about half of the banks' business loans portfolio.

Financial services represented 25% of bank loans to business in 2007, up from 13% in 2000.

When the crisis began in 2007, corporate bonds fell out of favor, leaving companies to borrow from the banks again. This year, debt issues in Tel Aviv were all but paralyzed with only the largest, highest ranking companies managing to raise capital. But for the banks, that means the weight of the construction and real-estate sector in their loans portfolios may well have increased even further in 2008.

Portfolio concentration based on the size of the loan recipient also worsened.

The index, which reflects the degree of inequality in the distribution of loan recipients within the overall bank loans portfolio (not just the business sector), rose from 2006 to 2007 because of the sharp increase in loans to companies, compared to the modest rise in credit to households.

Another worrisome parameter in the Bank of Israel's report for 2007 is a sharp increase in lending to specific borrowers at Hapoalim, Leumi and Discount. Borrowers such as Nochi Dankner, Yitzhak Tshuva or Lev Leviev may be singly responsible for more than 5% of a given bank's total lending. Yet their bonds have been pounded in a sign that the market is worried about possible defaults by their companies following the crisis.

The bank regulation report summarizes that the relative weight of large loan recipients in the Israeli banking system has remained high in recent years, when debtors abandoned the securities exchange as a means to raise financing. In 2008, with non-bank credit running dry, these last parameters are likely to indicate a further increase in the concentration of large loan recipients in bank credit portfolios.