Mark Garfield, head of International Banking at Zions Bank, recently traveled to Israel to visit a number of financial institutions, including the country’s leading banks, in order to establish formal banking relationships.
Banking in Israel
The banking system in Israel is mature and well established, dating back to 1902 when the Anglo-Palestine Bank was founded. That bank later became Bank Leumi, which is currently one of the top five banks in the country. As is the case in Canada, where a few banks dominate the banking system, these five banks control over 90% of the financial sector. In addition to Bank Leumi, they are: Bank Hapoalim, Israel Discount Bank, Mizrahi Tefahot Bank and First International Bank of Israel (FIBI). The largest is Bank Hapoalim with $93 billion in assets and the smallest is FIBI with assets of $28 billion.
All of the major banks have a similar ownership structure, in which private organizations own a large portion of the companies with the remainder owned by the public. The banks’ stocks trade on the Tel Aviv Stock Exchange. Four of the banks are in the TA-25, an index of the largest 25 companies by market capitalization. The banks generally have an equal distribution of clients among commercial customers, small businesses and individuals. They are well capitalized and have between 175 and 340 financial centers throughout the country, as well as international offices including some in the U.S. The vast majority of the Israeli population uses the financial system for a broad array of banking services such as personal and payroll deposits, retail credit and various types of loans, including mortgages. Israeli government policies encourage savings, which results in very high savings rates among its citizens.
When asked about his impressions of the banking environment in Israel, Garfield said, “The individual stories of many of the bankers were very interesting. One emigrated from Eritrea, another came from Russia. A few who were originally from the U.S. had spent much of their banking careers in New York. They had a strong desire to help the Israeli economy grow and were looking for opportunities to increase cooperation, commerce, and friendship between our two countries. In a very complicated geopolitical world, it was invigorating to see such optimism. I know that we share a hope that commerce and trade between our regions will only increase and strengthen over the coming years.”
Israel’s banks provide many services to support the country’s exporters. In order to facilitate these services, the banks have begun strengthening their correspondent banking relationships with foreign banks, increasing their FX trading and payment businesses, and engaging in some international expansion. It is for these reasons that they welcomed Garfield so warmly and were willing to establish a SWIFT relationship with Zions. In fact, it is expected that all five of the top banks will open SWIFT keys with Zions in the near future.
Trade with Israel
During his meetings with the Israeli banks, Garfield was able to acquaint them with Zions Bank, its business and services. He focused on the regional differences among the banks in the U.S and in doing so, pointed out the geographical reach and significant market share of Zions through its presence in the Intermountain West. He also discussed the interest that the State of Utah has in increasing trade opportunities with Israel. In this context, he informed those he met with about Governor Gary Herbert’s upcoming Trade Mission to Israel scheduled for April 2013. He pointed out that there are several types of businesses that Utah and Israel have in common including many in the biomedical, pharmaceutical, natural products, education, information technology, and water technology industries. These common interests provide many exciting opportunities for trade and collaboration between Utah and Israel that will benefit both.
Such a strong relationship is invaluable to companies that wish to establish or enhance trade with Israel. The U.S. and Israel already enjoy a robust trading relationship; the U.S. is Israel’s largest single trading partner and Israel is the biggest Middle East market for U.S. goods, with exports to that country growing from $2.5 billion in 1985 to $11.3 billion in 2010. The U.S. and Israel signed a free trade agreement (FTA) in 1985 that progressively eliminated tariffs on most goods traded between the two countries. An agricultural trade accord signed in November 1996 addressed the remaining goods not covered in the FTA, but has not entirely erased barriers to trade in the agricultural sector. Extensive opportunities for trade exist in industries such as biomedicine, IT, security, natural products, education, industrial chemicals, security and safety, health care, building and construction, travel and tourism, venture capital, and energy and water. Israel has a diversified, technologically advanced economy with substantial but decreasing government ownership.
As Garfield pointed out, there are abundant opportunities for both trade and banking between Israel and Zions and its clients. The relationships he was able to establish and strengthen with bankers there will provide a solid basis for mutually beneficial business interactions now and into the future.
- Israel’s land mass is roughly equivalent in size to the state of New Jersey.
- In 2010, Israel had a population of 7.59 million, with an annual estimated growth rate of 1.7%.
- Israel’s population is drawn from more than 100 countries on five continents, making its society rich in cultural diversity and artistic creativity.
- Israel’s major trade partners are the U.S., U.K. and Germany.
- Since 2009, U.S. exports to Israel are up 45% and Israeli exports to the U.S. are up 22%.
- In 2011 bilateral trade reached $36.9 billion with Israeli exports to the U.S. totaling $23 billion and U.S. exports to Israel totaling $13.9 billion.
- U.S. exports to Israel rose at a faster rate between 2009 and 2011 than exports in general, which rose about 40%.
- Israel was among the U.S.’s 10 largest export markets per capita in 2011.
- Israel is an attractive market for U.S. exports due to its $32,000 per capita GDP, low unemployment at 6.5%, and highly developed advanced market economy.
Sources: U.S. State Department, Embassy of Israel