The Banking Supervision Department is working to extend the validity of the temporary order reducing the capital requirements of the banks until September 30, 2021

  • In view of economic and health related uncertainty and its ramifications, the Banking Supervision Department proposes to extend the capital leniencies for banks until September 30, 2021. The Banking Supervision Department expects the banking system to use the capital surpluses to increase credit, and not for distributing dividends, at least until the validity period of the temporary order ends.
  • Even though over the course of the year it has been seen that the banks accumulated the capital buffers that had eroded, among other things by suspending the dividend distribution policy, we are still in an uncertain environment regarding the continuation of the health crisis and its related economic ramifications.
  • The banking system in Israel is robust, and the banks benefit from surpluses of capital and liquidity. Although the accelerated process of vaccination raises expectations for the economy’s rapid return to growth, the risks inherent in banking system activity remain high in view of the risk of additional waves of morbidity and the uncertainty that are liable to lead to an adverse economic impact.
  • The Banking Supervision Department is of the view that it is proper to adopt a cautious and conservative approach, to the extent that some of the impacts of the crisis have not yet been seen and in view of the potential for there to be hidden credit losses that have not yet been realized; this is in view of the transitory nature of the government support and the framework for freezing loans to businesses and households. The cautious approach is also required in order to comply with the expectation that the banks will continue to assist the Israeli economy in the process of exiting the crisis. As such, the banks will all the more so require careful and closely watched capital planning.
  • For the original press release on the issue, which was published on March 29, 2020:
​https://www.boi.org.il/en/NewsAndPublications/PressReleases/Pages/29-3-2020a12.aspx
  • In addition, a draft circular that was distributed today and that is attached to this notice, describes additional extensions in various guidelines that were given to the banking system for dealing with the coronavirus crisis and were supposed to end at the end of this month.