Israel's
Finance Ministry on Wednesday said it planned to implement a series of regulations by the end of 2009 to protect institutional investors from corporate bond defaults.
The ministry received recommendations from the so-called Hodak committee on how to tighten regulations after the market collapsed late in 2008, prices plunged and led to big losses by pension funds and insurance companies.
Headed by lawyer David Hodak, the committee recommended banning companies issuing bonds from selling their assets to banks so that bondholders would not receive anything in case of default by the company.
Companies will also not be able to change their controlling shareholder without bondholders having a say.
The new rules would only apply to institutions investing in Israeli corporate bonds.
The ministry noted that the local corporate bond market is just a decade old and the regulations would bring the development of the market up to standards of the United States other Western debt markets.
It added that Israel should still have a high yield market but pension funds and other institutions will not be able to invest in such bonds.
Among the other proposed regulations is a requirement that private companies issuing bonds provide financial information on the company.
"Israel is one of the first countries taking operative steps to fix the defects revealed by the crisis for the good of the public in general and pension savers specifically," Finance Minister Yuval Steinitz said in a statement, instructing the ministry's supervisor of capital markets to implement the measures by the end of the year.
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