Since the outbreak of the Swords of Iron War, the Bank of Israel has taken various actions to support the proper functioning of financial markets. Immediately following the onset of the war, the Bank of Israel spearheaded the formulation of a program, which was adopted by the banking system, aimed at supporting the financial activities of population groups particularly burdened by the conflict, including reservists, evacuees from conflict zones, and families of war casualties. This program has been extended multiple times throughout the war, with its terms updated in response to developments and the changing needs of different population groups.

In view of the current geopolitical uncertainty, the challenges it poses to economic activity, and the high profitability of banks in Israel, the Bank of Israel presents in this announcement principles for an additional program that it believes the banking system should adopt. Adoption of this program will contribute to customer well-being and strengthen public trust in the banking system.

Key elements of the program proposed by the Bank of Israel:

  • Program period: In general, the program will apply in 2025 and 2026. The period may be updated in certain cases, such as significant changes in geopolitical uncertainty, banking system profitability, or market conditions.
  • Annual program amount at the system level: Under the program, the banking system will allocate an annual total of NIS 1.5 billion to finance various relief measures for its retail customers. If the program continues for two years, the total cost will be NIS 3 billion.
  • The proposed amount reflects a proper balance between the need to allocate resources for substantial relief directly benefiting customers and the desire to not create challenges regarding the banking system's resilience and stability.
  • Annual program amount at the bank level: Out of the annual total of NIS 1.5 billion at the system level, each bank will finance relief measures for its customers based on its market share as of the program's publication date.
  • Financial relief measures for customers: Each bank will develop financial relief measures according to various categories, including:
  • Providing interest or benefits on positive account balances, and demonstrable improvements in interest rates on short-term deposits.
  • Reducing interest rates on negative balances (overdrafts).
  • Automatically transferring funds above a predefined minimum balance from current accounts to yield-bearing accounts (Sweep Account).
  • Offering fee exemptions or significant discounts to specific population groups.

The decision on the amount allocated to each category is at the discretion of each bank.

  • Reporting and disclosure: Each bank will publish the extent of the actual relief provided in its financial reports according to a reporting format to be issued by the Banking Supervision Department. The reports will be audited by the Banking Supervision Department.

Bank of Israel's Perspective

The Bank of Israel believes that adopting a program adhering to the above principles eliminates the need for specific taxation processes for the banking system and legislative processes aimed at encouraging the transfer of funds from current accounts to yield-bearing accounts or enhancing the transmission of the Bank of Israel's interest rate to interest-bearing deposits.

The Bank of Israel calls on the banking system to rise to the challenges of the current times and adopt the proposed program principles.

Ongoing Efforts to Enhance Competition

In parallel with the voluntary program proposal, the Bank of Israel continues to work on enhancing competition in the financial system by removing barriers and promoting infrastructural and public information measures. Some of these measures have already matured and are empowering customers, while others will mature in the future and contribute to enhanced competition.