The Banking Supervision Department announces a reduction of leverage ratio requirements from the banking system in order to allow the support of economic activity

Against the background of the continuation of the coronavirus crisis and its ramifications on the economy, and in order to continue to support the providing of credit by the banking system as a response to the economy’s needs, the Banking Supervision Department is reducing the leverage ratio requirements of the banking corporations by a half of a percentage point. It thus ensures that the leverage ratio will not serve as a barrier to extending credit to households and to the business sector.

 

In view of the continuation of the coronavirus crisis, and households’ and businesses’ continued dealing with cash flow problems due to the effects of the crisis, the need arose to ensure that the requirement of the banking system to comply with a minimum leverage ratio[1], set for routine times, does not present a barrier to the providing of credit during the crisis period. As such, it was decided as a temporary order, to reduce the requirement to a minimum level of 5.5 percent at the large banks (compared with 6 percent currently) and to 4.5 percent at the medium and small banks (compared with 5 percent today).

 

It is emphasized that setting the leniency does not reduce the importance of making informed credit decisions, in accordance with the banking corporation’s risk assessment and business considerations.

 

Supervisor of Banks Mr. Yair Avidan said, “This steps joins a series of steps taken by the Banking Supervision Department since the onset of the coronavirus crisis that are intended to allow the maintaining of the supply of credit in the market, alongside an easing for households and businesses. This easing, like the others included in the temporary order, was given following a precise examination of the risks and in accordance with the accepted international standards for easing during the coronavirus crisis.



[1] The bank’s Tier 1 capital relative to its total assets.​