The Bank of Israel has published the semi-annual report on the stability of the domestic financial system.
The analyses in the report relate to events that took place until December 2015.
The semi-annual Financial Stability Report noting that the domestic financial system has continued to demonstrate stability in recent months, against the background of accommodative monetary policy in Israel and abroad, and despite the gyrations in the global financial markets.
The Bank added that the financial system is exposed to the risk of declines in asset prices as a result of an increase in yields if the latter is derived from an increase in the risk premium or if it is accompanied by weaker growth than previously estimated. In particular, the high exposure of banks to the construction and real estate industry and to mortgages remains a risk.
The financial system is also exposed to the risk of international financial contagion. A series of examinations presented in the report leads to the conclusion that a potential crisis originating in the gyrations being experienced by the Chinese economy, commodity price declines, or the balance of the emerging markets that have borrowed high amounts abroad, particularly in foreign currency, can be expected to have only a limited effect on Israel, on condition that it does not spread to the advanced economies and does not become a global crisis.