Bank of Israel to offer non-bank credit deals to COVID-hit small businesses



People wear protective face masks as they shop at a market amid Israel’s second-wave coronavirus disease (COVID-19) lockdown, in Jerusalem October 5, 2020. REUTERS/Ammar Awad

December 13, 2020

By Steven Scheer

JERUSALEM (Reuters) – The Bank of Israel said on Sunday it would start offering repo transactions with supervised non-bank credit providers to increase the supply of credit to very small businesses struggling to borrow due to the COVID-19 crisis.

It said the new monetary tool would begin operating in the first week of January, with the objective of boosting credit supply to these businesses beyond what is issued by banks.

These non-bank providers, such as credit card companies and institutions, would be supervised by the Bank of Israel or the Finance Ministry’s capital markets division.

“In view of the crisis, lowering the cost of the financing source for non-bank credit providers will create an incentive for them and contribute to the pass-through from the general interest rate in the economy to the interest paid by small and micro businesses for the credit issued to them,” the central bank said.

Throughout the coronavirus pandemic the central bank has attempted to help small businesses by way of very low interest rate loans to banks, while allowing loan repayment deferments.

As part of the repo transactions, the Bank of Israel will receive tradable collateral from the credit card and other providers, including government bills and bonds and corporate bonds under certain criteria.

The interest rate will be set at 0.1% percent and subject to the provision of credit to small and micro businesses at interest of up to prime plus 1.3% percent and fixed at a rate of -0.1%.

The transactions will be for 6 months, with the possibility of an additional 6-month period under the same terms, the bank central bank said.

(Reporting by Steven Scheer; Editing by Raissa Kasolowsky)





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Non-bank lenders tighten the reins for office, retail and high-density living


Earmarked as no-go areas for some lenders is the retail sector, which has felt the brunt of falling sales and mall closures, and office developments, which are under pressure as more people opt to work from home.

There are some exceptions with higher profile projects being given funding, but they are seen as more one-offs than the norm.

In Melbourne, Australasian lender and investment manager, MaxCap Group arranged funding for the $120 million “Park Ave” project in South Melbourne through one of its large institutional mandates.

MaxCap has been lender on large-scale construction funding throughout the pandemic committing about $1.5 billion since April, including a $170 million apartment block in Box Hill, Melbourne and a $90 million residential project known as “The Ambrose”, located in Milton, Queensland.

Brae Sokolski, co-founder MaxCap Group, said funds would be advanced to finance the development and construction costs of the mixed-use development at 39 Park Street, South Melbourne.

For non-bank lender Chifley Securities’ principal, Dominic Lambrinos, commercial office space, retail and high-density, high-tower residential developments are now “no-go” areas for his group as the economy rides out the impact of the pandemic.

Developers continue to be squeezed by the major banks with low loan-to-valuation ratios and other stringent conditions being placed on them.

Dominic Lambrinos, Chifley Securities

Chifley Securities, which has about 140 lenders as clients offering loans from $15 million to $50 million, says it has gone from looking at lending on a geographical basis to an asset class focus.

“We are seeing less competition in the market as players have exited and the major banks maintaining their higher hurdles for financing deals, opening the way for Chifley and other remaining non-banks to fill the gap,” Mr Lambrinos said.

“This has given Chifley the opportunity to select fewer, but higher quality deals in the areas of construction, development and land banking.”

Chifley is seeing long-tail growth in hotels and other hospitality operations, retirement villages, boutique residential, medical practices and boarding houses.

Mr Lambrinos said that activity in smaller residential and hotel developments across the eastern seaboard remained strong, but warned that greenfields developments were proving to be very difficult to finance.

“Developers continue to be squeezed by the major banks with low loan-to-valuation ratios and other stringent conditions being placed on them, while non-banks like Chifley are commercial in meeting the majors’ rates and placing fewer conditions on the loans,” Mr Lambrinos said.

In a recent survey by Stamford Capital, it also revealed that the non-banking sector continues to power on, increasing market share and underwriting developments with limited pre-sales.

Half of non-banks surveyed require no pre-sales at all, although a quarter plan to increase this in the next six to 12 months.

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The Stamford Real Estate Debt Capital Markets Survey was conducted in February, 2020 and again in August, 2020 after the “first wave” of the global pandemic.

Stamford Capital associate director, Victoria, Barnaby Wilson, said non-banks continued to flourish in this market.

“Last year 34 per cent of non-banks in our survey required no pre-sales and this has jumped to 50 per cent this year – even with COVID’s impacts the non-banks continue to increase traction,” Mr Wilson said.

“It’s getting harder for large-scale developments to secure funding, with banks seeking significant levels of pre-sales.”

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