• Fri. Feb 23rd, 2024

JPMorgan Issues Warning of Growing Risk of Israel Investment due to Judicial Shakeup

Feb 4, 2023

One of the top financial institutes in the United States, JPMorgan recently warned of the growing risks associated with investing in Israel in light of the judicial overhaul plans of the new government.

On Friday, JPMorgan released the internal memo, only days after Prime Minister Benjamin Netanyahu had referred to US banking giant Goldman Sachs and JPMorgan as evidence that potential investors were not being driven away due to their plans of overhauling the justice system.

The memo

The JPMorgan memo cited the proposals put forward by Justice Minister Yariv Levin for the overhaul as well as the rise in ‘geopolitical hostilities’ as reasons for an increase in risk.

According to the document, the views that have been presented in it are the official position of the bank.

The memo in question compared the situation in Israel to that of Poland that had also introduced similar judicial reforms and in January 2016, it had seen its credit rating go down.

JPMorgan highlighted the possibility of the negative pressure the judicial overhaul would put on the credit rating of Israel.

It said that the country’s current credit rating is in the investment grade bucket, which means international investment could possibly slow down.

However, the bank did add that it expected it to have a limited impact on the market.

The response

A source close to Netanyahu shrugged off the report and said that most of those commenting did not have enough knowledge of the proposed plans for the judicial overhaul.

The source said that even if a thousand similar reports are issued, it would not matter because people will decide if it is worth investing or not.

They said that they were just trying to balance an unbalanced scenario and this would not stop smart money from coming in.

The source also asserted that the justice system would continue to be independent and the economy would flourish because there would be less ‘judicialization’.

Netanyahu, who is currently on an official visit to France, said that he had spoken to business people in France and they had said that they wanted to increase their investments in Israel and not run away.

Other details

Goldman Sachs had also cautioned in the previous week that exposure of the shekel has come in focus because of the local political developments taking place.

The report from Goldman Sachs dictated that the financial markets had seen limited impact of the five elections that had happened in Israel in the last three years.

However, it said that the current situation could have a bigger impact and they would have to monitor the ongoing developments closely.

It warned that the structural changes and their consequences for the financial markets could be serious.

The JPMorgan memo was published after Netanyahu had said on Sunday in a video statement that there had not been an investment risk warning issued by either of the banks.

He had specifically mentioned Goldman Sachs and JPMorgan in his statement and referred to them as two of the most influential and biggest investment banks.

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