The Israeli news outlet Ynet reported Wednesday that $4 billion has moved from Israeli to foreign banks outside the country in recent weeks due to the country's judicial reform plans.
According to Ynet, bank and financial sources whose names were not disclosed said the outflow is prompted by Prime Minister Benjamin Netanyahu’s controversial judicial reform proposal. Most of the money has gone to banks in the United States and Europe. High-tech companies are among those that have moved money out of Israel, according to Ynet.
The outlet did give a specific time frame. Netanyahu returned to power in late December.
Israel’s central bank, the Bank of Israel, told the outlet that it has not observed any unusual flow of funds.
Background: Netanyahu’s government is seeking to reduce the Supreme Court’s power by asserting political control over judicial appointments. Netanyahu argues the reform is necessary to express popular will, while critics warn it will hurt Israel’s democracy, international image and attractiveness to investors. Several protests in Israel have opposed the reforms.
The Israeli Supreme Court’s decisions on some hot-button issues have angered the right. For example, in 2022, the court halted the eviction of Palestinian residents from the Sheikh Jarrah neighborhood in east Jerusalem. Jewish nationalists have long argued the residents do not have a legal right to their homes.
Why it matters: The judicial reform is already reportedly causing major financial ramifications. In addition to the Ynet report, the Israeli technology news site Calcalist reported this month that Israeli high-tech companies have moved $780 million out of the country recently. The outlet did not provide a specific timeframe.
Also, the CEO of Israel’s Bank Hapoalim, Dov Kotler, told the Israeli news site Walla! last month that an outflow from Israeli banks was beginning.
Some international financial institutions have also warned against the reforms. Earlier this month, a leaked memo from the Wall Street bank JP Morgan obtained by Israel’s Channel 12 warned of increased investment risk in Israel due to the fallout from the reforms.
The British bank HSBC also warned in a report last week that the judicial reform could hurt investment in the Israeli economy.
Know more: Pressure from Israel’s tech sector could push Netanyahu to compromise on the judicial reform, Israeli journalist David Rosenberg wrote in a memo for Al-Monitor PRO this month.