Israel’s joint team for securitization urges careful obstacle removal

By Wendy Van Sickle

Columbus, Ohio, Nov. 16 – The Joint Team to Promote Securitization in Israel published its final report Thursday, recommending that the securitization market be developed cautiously by removing obstacles.

The main recommendations included:

• Making it possible to securitize a variety of loans and types of assets as part of a securitization transaction;

• Making it obligatory for the initiator of a securitization transaction to incur exposure of at least 10%of the credit risk of the securitized portfolio;

• Prohibiting complex securitization;

• Determining that the disclosure principles in securitization transactions provide the appropriate transparency for investors to understand the various aspects of the transactions and to properly price them;

• Establishing the terms for public offerings of securitization transactions, while imposing legal responsibility on the participants in the transaction; and

• Defining a dedicated neutral tax model for securitization transactions that will prevent tax distortions and double taxation.

The team’s interim report was issued in August, and input from representatives of the public, financial professionals and the banking system was used in putting together the final report.

“The recommendations included in the report will contribute to increasing the sources of financing in the economy, including for those providing nonbank credit, and will be able to lead to lower costs for credit to the business sector, including to small businesses, while contributing to the continued development of the credit market and to increased competition in the financial system,” Bank of Israel governor Karnit Flug said in the release issued jointly by the Bank of Israel, the Israel Securities Authority, the Ministry of Finance, the Ministry of Justice and the Israel Tax Authority.

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