BANK OF ISRAEL
Office of the Spokesperson and
Economic Information
February 25, 2015
Press Release
Debt Developments in the Economy, 2014
Summary
 In 2014, the balance of business sector debt grew by about NIS 17 billion (2.1
percent) to about NIS 816 billion. The increase in outstanding debt in the sector
was influenced by the depreciation of the shekel.
 Despite the increase in the balance of debt, there were net repayments of debt in
the business sector this year totaling about NIS 11.5 billion (-1.4 percent), for the
first time since 2010. Repayments were observed in bank credit, tradable and
nontradable bonds, and credit from abroad. In contrast, there was net raising of
debt through nonbank loans.
 Gross bond issuances by the business sector (excluding banks and insurance
companies) in Israel totaled about NIS 30 billion in 2014, an amount similar to
2013, mostly through tradable bonds. Despite these issuances, there was a
quantitative decline of tradable and nontradable bonds totaling about NIS 7.9
billion.
 The balance of household debt increased by about NIS 28.4 billion (6.9 percent).
Housing debt increased by about NIS 15 billion (5.2 percent) since the beginning
of the year and totaled about NIS 303 billion. The pace of growth in 2014 was
similar to the pace in the previous three years.
 The balance of nonhousing debt increased by about NIS 13 billion (11 percent)
since the beginning of the year—a significant increase compared to previous
years. Nonhousing debt constitutes about 30 percent of the total household debt
portfolio.
The business sector's outstanding debt
 Total outstanding business sector debt declined in December by about NIS 8.4
billion (-1 percent) to about NIS 816 billion. The decline was the result of net
repayments of bank credit, tradable bonds in Israel and nontradable bonds. The
decline was partially offset as a result of net bond issuances abroad. The shekeldollar exchange rate and the Consumer Price Index remained unchanged.
 In 2014, there were net repayments of business sector debt (totaling about NIS
11.5 billion, -1.4 percent) for the first time since 2010. The repayments were
concentrated in bank credit, tradable and nontradable bonds, and credit from
abroad. Despite these repayments, there was an increase of about NIS 17 billion
(2.1 percent) in the value of outstanding business sector debt, as a result of the
Debt Developments in the Economy, 2014
Page 1 of7
depreciation of the shekel against the dollar by about 12 percent, and net new
nonbank loans (Figure 1).
Table 1
The composition of business sector debt
Balance (NIS billion)
12-2014 10-2014 11-2014
382
385
387
153
161
157
88
87
89
192
182
191
816
814
824
12-2014
382
153
88
192
816
2012
1.9
2.9
19.5
9.2
5.1
2013
-3.5
-0.2
3.9
-2.2
-1.8
Change (percent)
* 2014 10-2014 11-2014
-1.0
-1.3
0.5
-6.2
-0.6
-2.3
8.0
0.3
2.3
14.6
2.3
5.2
2.1
-0.2
1.2
12-2014
-1.1
-2.4
-1.4
0.6
-1.0
Estimated Flow (NIS billion(
* 2014 10-2014 11-2014
-9.5
-6.9
0.5
-5.7
-0.8
-4.0
6.1
0.4
1.8
-2.5
-0.1
4.6
-11.5
-7.4
2.9
12-2014
-4.4
-3.6
-1.5
1.1
-8.5
2012
-1.4
-0.9
11.5
11.0
2.3
2013
-2.7
0.0
2.3
8.4
0.7
Change (percent(
* 2014 10-2014 11-2014
-2.5
-1.8
0.1
-3.5
-0.5
-2.5
7.5
0.4
2.0
-1.5
-0.1
2.5
-1.4
-0.9
0.4
12-2014
-1.1
-2.3
-1.7
0.6
-1.0
1. Debt to banks 1
2. negotiable bonds in Israel
3. Non-negotiable bonds and nonbank loans
4. Debt abroad 2
Total business sector debt
12-2012
400
164
78
171
813
12-2013
386
163
81
168
799
1. Debt to banks 1
2. negotiable bonds in Israel
3. Non-negotiable bonds and nonbank loans
4. Debt issued abroad
Total business sector debt
2012
-5.3
-1.4
7.5
17.3
18.1
2013
-10.9
0.0
1.8
14.5
5.3
1
When comparing balances of debt to banks, it should be taken into account that beginning in January 2011 new Bank Supervision directives referring to provisions
for impaired debts came into effect.
The reported balance of credit from nonresidents to the business sector is based on reports by Israeli companies. Recently, companies were added to the population of
reporting companies, which impacted on the reported balance beginning from December 2006. The effect of adding the new reporting entities is reflected in an increase of about
NIS 13 billion in the balance reported for December 2006.
* From the beginning of the year.
2
 Breakdown of business sector debt by lenders: Quantitative estimate data
(balance differentials minus the effects of price and the exchange rate) show that
in 2014, net repayments of debt to the banks totaled about NIS 9.5 billion (-2.5
percent), continuing a trend that began in 2012. There were also net repayments
of nonbank debt in 2014, further to the decline in the pace of its growth since mid2013. The repayments were concentrated in tradable bonds (-3.5 percent) and
nontradable bonds, and in credit from nonresidents (-1.5 percent). In contrast,
loans from institutional investors continued to grow in 2014, although at a slower
pace than in previous years (Figures 2 and 3).
Bank of Israel - Debt Developments in the Economy, 2014
Page 2 of7
 Data on the breakdown of banking debt by sectors show that in recent years,
there has been some replacement of credit to the business sector with credit to
households. Since the end of 2011, total outstanding business sector debt to the
banks declined from NIS 405 billion to NIS 382 billion, while total outstanding
household debt to the banks increased from about NIS 318 billion to about NIS
399 billion (Figure 4).
 The business sector debt to business sector product ratio continued to decline
in 2014, by an additional 1 percentage point, to 101 percent at the end of 2014,
mainly due to a larger increase in business sector product than in debt. Since the
end of the third quarter of 2008, the decline in the debt to product ratio has totaled
about 27 percentage points (Figure 5).
 The household debt to product ratio increased by about 1 percentage point in
2014, and was 40 percent at the end of the year, a relatively low ratio in a global
comparison. This increase was due to the increase in household debt at a faster
pace than the increase in product (Figure 5).
Corporate bond issuances1
 Total gross bond issuances by the nonfinancial business sector in Israel totaled
about NIS 2.1 billion in January 2015, all in tradable bonds.
 In 2014 , gross bond issuances by the nonfinancial business sector in Israel
totaled about 30 billion, mostly through tradable bonds, an amount similar to the
2013 total.
 In 2014, there was an increase in gross issuances through nontradable bonds,
which totaled about NIS 8 billion (about 26 percent of total issuances), four times
higher than the issuances of nontradable bonds in 2013. For the first time, four
Israeli companies raised debt from institutional investors abroad through bonds
registered for continuous trading by institutional investors on the Tel Aviv Stock
Exchange (Figure 6).
 The real estate and construction industry raised about NIS 12 billion in 2014
(about 30 percent of total issuances), after being prominent in the previous year as
well. The banking industry (which is not included in business sector debt)
significantly increased its issuances compared to 2013, and raised about NIS 10
billion during 2014 (Figure 7).
1
Including only bond issuances by Israeli companies in Israel: tradable offerings on the Tel Aviv Stock
Exchange and nontradable offerings reported by the Tel Aviv Stock Exchange (institutional
continuous, Nesher and Na’am).
Bank of Israel - Debt Developments in the Economy, 2014
Page 3 of7
 In 2014, bond offerings rated AA- or higher constituted about 44 percent of total
issuances, compared to 36 percent in 2013. The rest of the issuances were mostly
rated between A- and A+ (42 percent of issuances), a rating typical of real estate
companies that were prominent in raising debt this year (Figure 8).
Households' debt
 Households' outstanding debt increased in December by about NIS 3.2 billion
(0.7 percent) to about NIS 438 billion, as a result of net new loans.
 During 2014 households’ outstanding debt increased by about NIS 28.4 billion
(6.9 percent). The increase was the result of net new loans taken out totaling
about NIS 29.3 billion, and was partially offset by the effect of the decline in the
Consumer Price Index.
 Housing debt increased by about NIS 15 billion (5.2 percent) during the year, and
totaled about NIS 303 billion. The pace of growth in 2014 was similar to the
growth in the previous three years (Figure 9).
 Outstanding nonhousing debt increased during the year by about NIS 13 billion
(11 percent)—a significant growth compared to previous years. With that, there
was no change in the weight of nonhousing debt in total household debt—about
30 percent of the household credit portfolio (Figure 9).
 A breakdown of the balance of nonhousing debt by lenders shows that most of
the debt (86 percent) comes from banks, with the rest coming from the credit card
companies and institutional investors. The pace of growth of debt from all lenders
increased in the past year, although growth was more rapid among the institutional
investors (30.4 percent) and the credit card companies (14.9 percent).
Bank of Israel - Debt Developments in the Economy, 2014
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Table 2: Outstanding debt balances of households 1
Billion Shekels, current prices, month-ends
Balance
2010
2
Rate of change
From
Last Month
beginning quarter over
5
2011 2012 2013 10-14 11-14 12-14 of year
month
339
363
383
410
431
435
438
6.9%
2.3%
0.7%
291
318
341
369
392
395
399
8.0%
2.6%
0.9%
Of‫לדיור‬
which:
:‫מזה‬For housing
Of which: Not for housing
From instituional investors:
200
91
5.1
221
96
5.9
243
98
6.5
264
105
7.3
279
112
8.2
281
114
8.3
283
116
8.6
7.0%
10.4%
16.8%
1.7%
5.0%
6.2%
0.8%
1.1%
2.9%
Of which: For housing7
Of which: Not for housing
1.6
3.6
2.1
3.8
2.5
4.1
2.8
4.5
2.6
5.5
2.6
5.7
2.7
5.9
-4.8%
30.4%
0.7%
8.9%
1.9%
3.3%
Total household debt
According to sources:
‫מבנקים‬
From banks:
6
From credit cards
6
3
Government (directed credit)4
Of which: For housing
According to uses:
Total for housing
Total not for housing
Notes:
8.5
9.0
9.6
10.3
11.8
11.8
11.8
14.9%
0.0%
0.0%
34.7
31.1
30.8
27.6
26.1
23.4
23.0
20.6
19.8
17.8
19.5
17.5
19.1
17.2
-16.8%
-16.8%
-5.0%
-5.0%
-1.9%
-1.9%
233
107
251
112
269
114
288
122
300
132
301
134
303
135
5.2%
11.0%
1.2%
4.6%
0.6%
1.0%
1
Individuals, not businesses
2
Excluding credit from foreigners, due to lack of data
3
Credit under the responsibility of credit card companies; Credit under the responsibility or guarantee of banks is included in bank data
4
Credit directed to those eligible for mortgage assistance is the majority of this figure, the remainder is credit to students
5
Last three months
6
Includes loans given with house as collateral. As of December 2010 - about NIS 20 billion.
7
Until August 2013, the data did not differentiate between mortgage-backed loans to households and mortgage-backed loans to the business sector.
Such segmentation began in August 2013, and the data were revised retroactively, so that part of the balance was reallocated to business sector debt.
 In January 2015, there was a decline in taking out new mortgages, which
totaled about NIS 4.6 billion. In 2014, there were about NIS 51.5 billion in new
mortgages taken out, similar to the total for 2013 (Figure 10).
The cost of the debt
 In December, the interest rate spreads in the nonindexed track narrowed by
about 0.02 percentage points to 3.21 percentage points. Compared to the end of
2013, this differential has narrowed by about 0.15 percentage points, as a result of
the larger decline in the interest on outstanding credit than the decline in interest
on outstanding deposits.
 During 2014, the interest rate on marginal indexed bank credit (granted during the
month) declined by about 0.14 percentage points. The spread between credit and
interest on indexed deposits narrowed by about 0.2 percentage points to 1.62
percent at the end of 2014.
Bank of Israel - Debt Developments in the Economy, 2014
Page 5 of7
Table 3: Cost of Debt
Interest rate (percent)
12/13
10/14
11/14
12/14
Average interest on unindexed bank credit
4.19
3.60
3.60
3.58
Interest on CPI-indexed bank credit granted during the month
2.47
2.21
2.30
2.33
3.36
3.23
3.23
3.21
1.81
1.53
1.64
1.62
1.28
1.49
1.46
1.84
Cost of bank debt
Spreads (percentage points)
Spread between interest on credit and interest on unindexed deposits
Spread between interest received on credit and interest paid on indexed deposits during the
month
Spread between indexed corporate bonds (Tel-Bond 60) and indexed government bonds
(average)
Housing loans granted during the month by banks – Average Interest rates
12/13
11/14
12/14
01/15
Variable rate, unindexed sector
2.27
1.48
1.57
1.65
Fixed rate, CPI-indexed sector
2.55
2.17
2.18
2.28
 During 2014, the average interest rates on new variable rate, unindexed
mortgages declined by about 0.7 percentage points, in parallel with a decline of
0.75 percentage points in the Bank of Israel interest rate. In January 2015, the
interest rate increased by 0.08 percentage points to 1.65 percent. (Figure 11)
 The average interest rate on fixed rate CPI-indexed mortgages declined by
about 0.37 percentage points during the year. In January 2015, this rate increased
by about 0.1 percentage point to 2.28 percent (Figures 12).
 The average spread between the yield on CPI-indexed corporate bonds—
measured by the Tel Bond 60—and the yields on CPI-indexed government
bonds widened by about 0.6 percentage points on average during 2014 to 1.84
percentage points. In January 2015, this spread remained virtually unchanged
(Figure 13).
Bank of Israel - Debt Developments in the Economy, 2014
Page 6 of7
For links to Information and Data on the Bank of Israel website:
http://www.boi.org.il/en/DataAndStatistics/Pages/MainPage.aspx?Level=4&Sid=53&
SubjectType=2
For mortgage data:
http://www.boi.org.il/en/BankingSupervision/Data/Pages/Tables.aspx?ChapterId=13
Bank of Israel - Debt Developments in the Economy, 2014
Page 7 of7