any other type of credit. over the same period, institutional investors have broadened the allocation of their assets, particularly with respect to investments abroad which have grown from 8 % to 19 % of their assets between 2005 and 2015. however, they have so far not taken much part in the retail credit market, either in mortgages or in consumer credit. the truth is that it is not typical for large asset managers in developed countries to enter the retail lending market. institutional investors in israel have entered the corporate debt market during the past decade, despite the fact that this sector shrunk as a share of gdp during that period. so we know that retail lending has been growing, but it is dominated by the banks, while corporate lending has not been growing as a share of gdp and has been the subject of competition between institutional investors and banks. what about small businesses? first, the importance of small businesses in the israeli economy is similar to that in the other oecd countries, in fact a bit larger, constituting 42 % of business sector gdp – a significant part of the economy that could be a source of economic growth. the banks increased the volume of lending to small and medium businesses from 36 % of banks ’ business sector credit to 44 % between 2011 and 2014. an international comparison is difficult because the distribution is very wide. what about pricing? well, the smaller the business, the higher the interest rate it pays. does this reflect the risk involved or market power? what is clear is that profitability over the past 4 years has been much higher in the household and small business sector than for other types of credit. even if we take into account that these years are upcycle years, and profitability is likely to be affected negatively in a downcycle, there are good reasons to believe that the higher pricing is in part due to market power. recent legislation and regulatory changes will tackle this problem and should bring the institutional investors, to that the small business and household credit market as well. the establishment of a credit registry tackles the problem of asymmetric information, while the legislation enabling securitization will allow institutional investors to enter the retail market indirectly – as it is done in many other places in the world – by connecting institutional capital with the banks ’ ability to grant credit, which will lead to an expanded supply of credit and lower financing costs. bis central bankers ’ speeches

and approved by the government have not yet been implemented. it is thus important and urgent that all of us, including the banks, join in the efforts to achieve the important objectives before us. i therefore expect the banks to play their part by finding the correct balance between the need to operate a cautious and prudent policy, essential in itself, and their responsibility as one of the main tollgates along the road towards the economy's medium - and long - term growth. failure to strike the right balance will cost the economy very dearly. the bank of israel will do everything within its authority, in its role as interest rate policymaker and as supervisor of banks, to help steer the economy back onto the path of healthy and rapid growth. i am sure that the government will also play its part. it is vital that the banks, on their part, continue to manage their business while maintaining their robustness, and take full account of the implications of their decisions on economic growth. israel's economy has what it needs to grow.