Report: Bank officials believe $4 billion moved out of Israel in recent weeks

As coalition ploughs ahead with plans to shackle judiciary and uncertainty sweeps local market, individuals and companies are looking to shift money to foreign accounts

A man uses an ATM machine on Hillel Street in downtown Jerusalem on October 7, 2020. (Nati Shohat/Flash90)
A man uses an ATM machine on Hillel Street in downtown Jerusalem on October 7, 2020. (Nati Shohat/Flash90)

Bankers estimate that some $4 billion has been transferred out of Israel and into foreign banks in the past three weeks, amid growing fears over the government’s impending judicial makeover, according to a Wednesday report.

Several unnamed banking sources cited by Ynet news said the majority of the outflowing capital was transferred to Europe and the United States, and moved mostly by individuals rather than institutions. It said that in the past two weeks “about 50 companies,” mostly from the high-tech sector, had also moved money abroad.

In recent weeks, tech companies, moneymakers, business organizations, policymakers and prominent economists have repeatedly warned that the judicial overhaul plan is likely to hurt Israel’s standing as a stable hub for investments, since an independent judiciary is seen as a basis for economic prosperity.

Ynet reported that banking and finance officials indicated that the outflow of capital appeared to be increasing, though the sources were unwilling to provide specific numbers.

In a statement, the Bank of Israel told Ynet: “Until now there are in fact no unusual movements of funds moved abroad and the bank is constantly monitoring the situation.”

Meanwhile, Ofir Angel, chairman of financial consulting firm Auren Israel,  backed up the anonymous officials’ assertion, estimating that the amount moved from Israel in recent weeks was “between $2-4 billion,” adding that he expected the trend “will only increase in the coming days.”

The Tel Aviv Stock Exchange, in the center of Tel Aviv, December 25, 2018. (Adam Shuldman/Flash90)

If the exodus of capital continues to gather steam there are fears that the government may try to restrict the movement of money out of the country, or that banks may place caps on the movement of foreign currency, the report claimed.

“The new trend emerging in recent days is precisely that of private households, families with capital, mainly from the top one percent, who have started to move money, as well as those with smaller capital from the top decile and below,” Angel told Ynet.

“We’re talking about dozens of inquiries a week from small or large capital owners. From a family with half a million shekels in savings to families talking about transferring tens and hundreds of millions overseas. The protest [against the judicial legislation] has its effects, and the considerations are not always rational.”

One individual who had transferred money out of the country told Ynet that the decision was down to a lack of trust.

“I do not trust this government. I’m not on the left or the right. I’m Israeli,” the unnamed individual said. “But I’m concerned that the reforms will badly harm the economy and the Shekel. Therefore, my money will be worth a lot less very soon — we can already see that trend now.

“I’m hurrying to transfer a significant part of my capital to a foreign bank account that I maintain elsewhere before the reforms will be approved and the avalanche begins.”

Some Israelis holding between $5-50 million in liquid assets, were reportedly exploring applying for foreign citizenship in order to hedge their wealth by transferring some of their capital to bank accounts in those countries.

On Tuesday, leading bankers warned Finance Minister Bezalel Smotrich of potential damage to the economy caused by the government’s moves to curtail the judiciary.

Workers from the high-tech sector protest against the proposed changes to the legal system, in Tel Aviv, on February 7, 2023. (Tomer Neuberg/Flash90)

In a tense meeting, members of the Association of Banks in Israel told Smotrich they had seen early signs the planned legislation will damage the economy and urged the coalition to adopt a compromise plan proposed by President Isaac Herzog, Hebrew media reported.

“There are negative indications. We see a ten-fold increase in interest in opening savings accounts in foreign banks. The shekel is growing weaker, Israel’s risk factor is rising and our stock exchange is doing worse than others around the world,” Uri Levin, the CEO of Israel Discount Bank, reportedly said.

A number of Israeli unicorns, or companies worth over $1 billion, have already announced that they are pulling significant funds from Israeli bank accounts and placing them abroad due to pressure from concerned foreign investors.

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