However, the framework became outdated and could not adequately capture the types of risks that banks face in today’s increasingly market-based credit intermediation environment. As a result, offbalance sheet exposures as well as operational, legal and reputational risks were not appropriately identified and measured.
At present, as I mentioned, we at the Bank of Israel are examining new ways to boost competition in the banking system, with an emphasis on the household sector. Why is the level of competition low? In Israel there are only a limited number of banks, and in effect two large banks capture most of the banking market.