Remarks by the Supervisor of Banks to the “Fair Value Forum”


·         “The banking system and the credit card companies were prepared for the crisis, partly in view of the guidelines and requirements imposed by the Banking Supervision Department in recent years. The system rapidly transitioned from routine operations to emergency footing, and reacted immediately upon the outbreak of the crisis through wide scale provision of credit and deferral of payments.”

·         “The economic situation is characterized by uncertainty and an increasing level of risk accompanying the banking system’s activity. The Banking Supervision Department will continue monitoring the stability and liquidity of the banking system. The banks must continue guiding their customers in order to provide the optimal response to customers’ needs, while also understanding the development of the risks inherent in the banking credit portfolios.”

·         “This hour is also an opportunity for the system to continue leveraging the transition to activity using digital means, thereby contributing to the well-being of the banking customer both in terms of convenience and ease of executing banking transactions, and in the lower cost of such activity.”

·         “Due to the unique nature of the crisis, integrated and coordinated activity between the various entities, with a systemic view, is important. This includes government involvement in assistance to get through the crisis, via unemployment benefits and the provision of grants and guarantees.”

·         “The Banking Supervision Department is in the midst of an initial process of analyzing and gaining insights from the crisis. This process is also being conducted at the banks and credit card companies.”

 

Supervisor of Banks Yair Avidan delivered a lecture yesterday as part of the periodic meetings held by the “Fair Value Forum” at IDC Herzliya.

 

During the lecture, the Supervisor reviewed the Banking Supervision Department’s measures in dealing with the corona virus crisis, and the assistance to households and businesses. He emphasized the preparedness and readiness of the banking system and the credit card companies in Israel, which allowed them to deal with a significant crisis while maintaining their ability to support the economy. The Supervisor further noted that the system reacted immediately upon the outbreak of the crisis, by providing credit and deferring payments, and rapidly transition from routine to emergency operations.

 

The Supervisor noted that one of the main factors enabling the banking system’s reaction was the leniencies issued by the Banking Supervision Department—chiefly the leniency in capital requirements—as well as a series of further leniencies that made it easier to provide banking services to the general population while enabling functional continuity during the closure.

 

In addition, the digital transformation that the system has undergone in recent years, encouraged and guided by the Banking Supervision Department, made it possible to continue providing banking services to the public during the crisis, even in view of the restrictions on public movement and while most bank branches were closed.

 

The Supervisor of Banks emphasized that the Banking Supervision Department is in the midst of an initial process of analyzing and drawing insights from the crisis, and that this process is also taking place within the banks and credit card companies. The Supervisor detailed the main risks with which the system must deal with a forward-facing view. These include credit risks, which are expected to increase together with expectations of increased loan loss provisions; cyber risks, in view of the increase in the use of direct channels; and money laundering and terrorism financing risks, which are also influenced by the increase in the use of direct channels. These all require adjustments in the risk management processes.

 

In conclusion, the Supervisor noted that the economic situation is characterized by uncertainty, and the level of risk accompanying the banking system’s activity is increasing. The Banking Supervision Department will continue monitoring the stability and liquidity of the banking system, and the banks must continue to guide their customers in order to provide the optimal response to their needs, while understanding the development of the risks inherent in the banking credit portfolios. This hour is also an opportunity for the system to continue leveraging the transition to activity using digital means, thereby contributing to the well-being of the banking customer both in terms of convenience and ease of executing banking transactions, and in the lower cost of such activity. The Supervisor further noted that due to the unique nature of the crisis, integrated and coordinated activity between the various entities, with a systemic view, is important, including through government involvement in assistance to get through the crisis, via unemployment benefits and the provision of grants and guarantees.