Bank of Israel chief: Brexit will have little impact on Israel - Zeev Klein

by Zeev Klein

Bank of Israel of Israel Governor Karnit Flug says banking sector will not have to take emergency steps • "Britain is a significant trading partner for the Israeli economy, and it is important to maintain the economic ties between countries," Flug says.

Bank of Israel Governor Karnit Flug | Photo credit: Reuters

Last Thursday's Brexit referendum, in which a majority of voters in the United Kingdom endorsed leaving the European Union, will not have major repercussions on Israel, Bank of Israel Governor Karnit Flug said on Monday. This was her first statement on the referendum's results. 

Flug also said that the central bank was unlikely to lower its benchmark interest rate in the near future and added that Israel would not have to take drastic steps to adjust to the new situation. Flug noted that Israel's banking sector will not have to take emergency measures, despite foreign banks taking such steps. 

"We have again seen an illustration that the environment in which policy operates both in Israel and around the world does not cease to surprise or to provide dramatic developments that pose complex challenges and dilemmas to policymakers," Flug said according to a Bank of Israel press release. "Britain's departure from the European Union is not expected to have a dramatic effect on global growth, despite the fact that it may have a significant impact on the U.K. itself."

Flug further noted, "Britain is a significant trading partner for the Israeli economy, and it is important to maintain the economic ties between our two countries." She expressed hope that Israel would be able to reach new "bilateral arrangements" with Britain and other countries to allow for a smooth transition and "prevent a negative impact to trade beyond what may take place as a result of the weakening of the pound sterling [should that persist]."

The central bank's Supervisor of Banks Hedva Ber said on Monday that the "events over the past several days prove that maintaining financial stability in the banking sector is paramount." Ber added that "Israeli banks have prepared for this crisis but we are duty bound to prepare for the dangers that lie ahead." 

On Sunday, Prime Minister Benjamin Netanyahu and Finance Minister Moshe Kahlon made similar comments aimed at touting the resilience of the Israeli economy. Speaking at the start of the weekly cabinet meeting, Netanyahu said the referendum's results have "no direct effect on Israel, other than the fact that we are part of the global economy."

"Israel's economy is strong," Netanyahu said. "It has large foreign currency reserves, and if Brexit has any effect, it is not expected to be a major one, other than the global economic tremors. I think that as this process [of Britain leaving the EU] gets underway, Israel is in a good position."

Kahlon said that his ministry "looked at how the Israeli market was reacting to the British decision, and realized that it didn't require us to intervene."

According to Kahlon, "The Finance Ministry and the Bank of Israel are monitoring the economic ramifications the British departure from the EU might have on Israel. We have set up a situation room in the ministry that is staffed around the clock and is monitoring developments."

Zeev Klein

Source: http://www.israelhayom.com/site/newsletter_article.php?id=34629

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