Israel stocks drop on SVB failure as government vows aid

ISRAEL: Israeli shares slid more than 2.5% lower on the Tel Aviv Stock Exchange (TASE) on Sunday led by financial firms following the failure of SVB Financial Group late last week, while the government vowed to help Israeli tech firms affected. With Israel's trading week running Sunday through Thursday, it was the first opportunity for Tel Aviv investors to react to the failure of Silicon Valley Bank, the largest bank to fail since the 2008 financial crisis but largely seen as an isolated event.

Banking regulator Yair Avidan said the SVB failure was an unfortunate opportunity to stress what is often taken for granted - ensuring the stability of the financial system. "We are closely examining the case and following the developments, both immediate and those that may come in the 'next waves'," said Avidan, the Bank of Israel's Supervisor of Banks.

He said he was taking part in an inter-ministerial team established by Finance Ministry to monitor, analyze and formulate a response as needed. Israel's tech sector is the country's main growth engine and its relationship with the Silicon Valley region is strong. Many Israeli startups had accounts at SVB although the amounts are not fully known.

Compugen Ltd said that through its U.S. subsidiary it currently held about 1.3% of its cash and cash equivalents with SVB, but "considers its exposure to any liquidity concern at SVB as immaterial." NextVision, a maker of micro stabilised cameras, said in a regulatory filing in Tel Aviv that it withdrew on Thursday almost all of the $2.7 million it held in SVB.

Qualitau Ltd, a developer of test equipment to the semi-conductor industry, said it had nearly $17 million at SVB and most of that was not federally insured. It added it had "no information regarding the amounts of money it will be able to withdraw in the future from the balance of funds deposited in SVB and in relation to the timing when it will be possible to withdraw these funds."

Qualitau added that given an existing backlog of orders, it was able to continue activities. The Tel Aviv index of the five largest banks was down 2.8% in afternoon trading, while the index of eight insurers fell 4.5%. Government bond prices rose as much as 1.5%.

Prime Minister Benjamin Netanyahu said he would discuss the scope of the crisis with his finance and economy ministers and the Bank of Israel governor to see "if there are any necessary actions to help Israeli companies that have fallen into distress, especially liquidity distress, following the collapse of SVB." "We have an obligation, of course, to try to protect these companies, whose main operations are in Israel and will remain in Israel, and also their employees," he told cabinet ministers in a veiled rebuke to high-tech executives who have actively protested the government's planned judicial reforms and those who have said they would pull money out of Israel.

He added that Israel's economy is "one of the safest and most stable economies in the world." "We stand by the Israeli hi-tech companies and will accompany them even in moments of crisis," said Finance Minister Bezalel Smotrich.

Data published on Sunday showed Israel's economy grew 6.4% in 2022 and an annualised 5.6% in the fourth quarter. Israel's two largest banks, Leumi and Hapoalim , said their tech banking arms would issue loans to startups and other tech firms that were without access to credit in the wake of SVB's collapse.

Leumi said that it was able to help customers transfer about $1 billion to Israel from SVB prior to the Federal Deposit Insurance Corporation (FDIC) being named as receiver for later disposition of the U.S. bank's assets.