’ s banking supervision particularly, must remain vigilant in supervising the banking system generally and the mortgage - lending industry specifically. the structure of israel ’ s mortgage - lending market is different today than it had once been, and it is important to understand the risks that exist today, address them, and avoid complacency arising from the thought that this market was once considered especially stable. the bank of israel is duty - bound by law to maintain financial stability in the economy at large. in this context, the concept of macroprudential supervision – supervision of stability at the macro level – has been mentioned recently. this concept means that even if the situation in any particular market or financial institution may look good, systemic problems that endanger overall stability may exist. in the u. s., for example, people thought that the subprime market was relatively small and that lehman brothers ’ balance sheet was not especially big. both of them, however – the subprime market and lehman brothers – ultimately dealt the system a very grave blow when they collapsed. the bank of israel has already taken macroprudential steps in regard to the real - estate market and the government has taken measures that should increase housing supply. at the moment, there are indications – no more than indications – that the housing market is leveling off. current data from various sources are painting contrasting tableaux ; we need to wait for the situation to become clear. if we find that real - estate prices are continuing to rise rapidly, we will have to take additional measures. we are also concerned about the growing use of nonbank credit to finance property investments in eastern europe. complacency, as stated, is highly dangerous in this context. even if no financial institution has collapsed in the current crisis in israel, we should remember that it was a damn close run thin. we were forced, for example, to unfurl a safety net for the pension funds during the crisis, some domestic corporate bonds had to the reorganized, and so on. one cannot rely on the regulators only. the key to a safe banking system is risk management at every bank and every financial institution individually. we need to remember that bad loans are issued in good times. an important part of learning the lessons from the crisis takes place at the international institutions. the center of gravity in the global economy is shifting from west to east and this finds expression at the international agencies as well. these entities engaged, for example, in developing systematic bankruptcy

the proper tools for this both through the required legislative changes – for example, there is a proposed fair credit law that sets out criminal penalties for collecting interest beyond a rate set by the law – and by making resources available. in summation, the gray market in israel is an existing fact. there is place for a credit market beyond the banking system, mainly concerning increased access to credit. the market can also contribute in terms of competition. it is important to establish a regulatory framework to regulate, supervise and enforce the law and regulations for activity of the noninstitutional market. there are currently many processes in various committees relating to some of the problems. there is a committee in the ministry of finance to establish a dedicated regulator, there is a committee to increase competitiveness in the financial services, and the government is leading various efforts to assist small businesses. i am aware of the desire for everything to be here and now. but we need to deal with these issues properly, with the proper regulation, even if it takes time, since the damage of promoting unregulated financial activity will exceed the benefit, and the victim, as always, will be the public. bis central bankers ’ speeches