Main points of the address by the Deputy Governor of the Bank of Israel, Dr. Meir Sokoler, to the Conference of the Ministry of the Interior on Securitization in Local Authorities

29.1.2006

Main points of the address by the Deputy Governor of the Bank of Israel, Dr. Meir Sokoler, to the Conference of the Ministry of the Interior on Securitization in Local Authorities:

"The development of securitization is important to Israel's economy for three main reasons: it provides alternatives to the banks as sources of finance; it lowers the cost of sources of finance and reduces the financial intermediation gap; and it improves liquidity and risk allocation."

"The development of securitization (the issue of bonds backed by expected streams of income) in Israel is important to the economy for three main reasons: it provides alternatives to the banks as sources of finance; it lowers the cost of sources of finance and reduces the financial intermediation gap; and it improves liquidity and risk allocation. This was stated by Dr. Meir Sokoler, Deputy Governor of the Bank of Israel, in his address to the Conference of the Ministry of the Interior on "Securitization in Local Authorities" held today in Kfar Hamaccabiah.

Dr. Sokoler stressed that the main use of the proceeds of municipal securitization (the issue of bonds by municipalities against their future income streams) must be the lowering of the cost of financing- in other words, the repayment of high-interest bank loans.

"The necessary adjustments must be made to the legal framework so that it does not constitute an obstacle to securitization," said Dr. Sokoler. In this context he drew attention to the fact that a high proportion of apartments in Israel are not registered in the Land Registry, which makes mortgage securitization in general, and reverse-mortgage securitization in particular, difficult from a legal standpoint.

Dr. Sokoler also spoke of the importance of publishing a prospectus that spells out in the clearest terms who bears the inherent credit risk in the bond. "The prospectus must include information that will make it possible to identify which entity is transferring the risk and which entity takes on the risk as a result of the securitization," he said.