The supervisor of Israel’s Banks, Ze’ev Abeles, in comments made at a recent seminar,says that he is set to introduce new rules that will not allow corporate takeovers to take place financed purely by bank loans. Purchasing a company will require at least some of the finance to come from the investors themselves and banks will see restrictions on the amount of credit they are able to extend for takeover purposes. The new rules are a reaction to a number of large deals that have been made recently, including a failed attempt to buy half of a recent Bezeq Israel Telecommunications Ltd offering. Abeles is concerned that because the ability to pay back the loans often relies on the performance of the new acquisition and investors may become prone to default which will have a knock-on effect on the banks themselves. He is also concerned that the ability to finance takeovers by 100% loans will result in investors being less cautious in their profit projections. Abeles suggested he would have preferred that the banks regulated themselves but they failed to do so.
