You probably heard of the latest financial scandal in the US. Last Friday, the 10th of March, the bankruptcy of two North American banks was declared: Silicon Valley Bank (SVB), which focused on technology startups, and Signature Bank, which specialized in providing banking services to law firms.
Shortly thereafter, federal authorities announced measures to contain the consequences of the financial crisis generated by the collapse of institutions. The financial market was apprehensive about the repercussions, fearing consequences similar to those of the banking crisis experienced by the United States in 2008. The market’s main fear after a bank fails is that the population will ask for the redemption of resources allocated in other banks, creating a liquidity problem for the sector. “Banks work by lending money from third parties. If the entire population needs to withdraw their savings simultaneously, the available cash will not be enough to fulfill the redemptions. This happening in a macro way would mean a systemic break, which has negative implications for the entire economy.”
In order to prevent this from happening, the Fed launched a line of financing that insures the bank’s depositors. One of the main reasons for Silicon Valley’s lack of liquidity was rising interest rates in the United States — a considerable part of the bank’s assets were allocated in US Treasury bonds or in participation in the startups they financed, both with negative revisions in their equity value with the recent increase in interest rates.
What This Means for Israelis and Jews Abroad
It’s important to note that the bankruptcy of SVB would have significant consequences for its shareholders, clients, and employees. Many Jews who were invested in SVB faced difficult times as many people could not withdraw their money before its bankruptcy. Moreover, SVB had been involved in supporting Jewish organizations and causes, and its bankruptcy impacted those organizations.
For Olim who had been transferring assets from the US to Israel — a common step during the Aliyah process — the SVB collapse was a reminder of the importance of diversification and of understanding the risks of concentrated exposure to any single institution. New Olim moving funds from the US to open an Israeli bank account or to eventually buy property in Israel should always use regulated, established currency transfer services and spread their assets appropriately.
Investors can learn several lessons from the SVB scandal, including:
- Conduct proper due diligence: Always review a financial institution’s financial statements, assess its risk management practices, and analyze its track record before investing.
- Pay attention to red flags: If a bank has a history of regulatory violations or its financial statements are unclear, proceed with caution.
- Diversify investments: Avoid putting all your eggs in one basket. This is especially relevant for Olim who are managing assets across two countries — maintaining diversified holdings in both Israeli and foreign accounts reduces concentration risk significantly.
- Keep a long-term perspective: Short-term volatility is part of any investment journey. New Olim benefit from Israel’s 10-year foreign income tax exemption (olim taxation), which gives them a long runway to manage their foreign assets without immediate Israeli tax pressure. See our Israeli tax guide for Olim for the full picture.
Israel Remains a Strong Place for Investment
Israel has been recognized as a very good investment destination for several reasons:
- Thriving innovation ecosystem: Israel is one of the world’s most innovative countries, with a thriving startup ecosystem. Israel ranks highly in global innovation indices and has produced many successful technology startups, including Waze, Mobileye, and Check Point. There are more Nasdaq-listed companies from Israel than from any country outside North America.
- Strong support for entrepreneurship: The Israeli government offers tax benefits for investors in startups and has established the Israel Innovation Authority, which provides grants and loans to startups. For Olim with entrepreneurial ambitions, this ecosystem is actively welcoming — job opportunities in Israel in the tech sector are among the most accessible for English-speaking immigrants.
- Skilled workforce: Israel has a highly educated and skilled workforce with a strong focus on science and technology. The average salary in Israel for senior tech roles is competitive globally.
- Strategic location: Israel is located at the crossroads of Europe, Asia, and Africa, with a well-developed infrastructure including modern airports and ports.
- Political and economic stability: Despite being in a volatile region, Israel has a stable democracy and a well-functioning market economy with a low debt-to-GDP ratio, low inflation, and a strong currency.
Concluding Remarks
Israel offers a unique combination of factors that make it an attractive destination for investment, innovation, and immigration for Jews around the world. With a thriving high-tech ecosystem, strong support for entrepreneurship, a highly skilled workforce, strategic location, and political and economic stability, Israel has become a beacon for those seeking to invest, create, and live in a dynamic and innovative society. It is not surprising that many Jews have chosen to move to Israel and contribute to the country’s growth and success. Olim Paveway is here to help you settle in a much smoother way — get in touch with us today.