The Banking Supervision Department calls on the banks to apply a prudent and conservative approach in the distribution of dividends
- The banking system in Israel is sound, and the banks have surplus capital and liquidity.
In general, the banks have passed the COVID-19 related economic disruption so far, and have capital ratios that are higher than the minimum requirements. It is expected that the banks will be able to continue supporting the economy through the economic disruption and its recovery.
- There is still an elevated degree of economic uncertainty due to the COVID-19 pandemic and its economic implications, including on the banks.
Even with the increasing trend of recovery from the COVID-19 related economic disruption, the level of uncertainty remains high, and there is a risk that some of the effects of the crisis have not yet been fully reflected or realized. These risks and uncertainty require continued prudent and conservative capital setting. In addition, the Banking Supervision Department expects the banks to continue to utilize their surplus capital to increase credit and to support the Israeli economy through the economic disruption and its recovery.
- The banks are required to apply a stringent, prudent, and conservative approach in their capital setting.
In view of the above, the board of directors of a bank considering a dividend distribution must adopt a prudent and conservative approach, and must base the decision on a forecast that relates to the future impact of the COVID-19 related economic disruption on the bank’s exposure and capital. The Banking Supervision Department considers is that making a dividend distribution of an amount exceeding 30 percent of profits for the year 2020 would not be considered as prudent and conservative capital setting.
The first notice on this matter, published on March 29, 2020, is available at:
The second notice, published on March 7, 2021, is available at:http://www.boi.org.il/en/NewsAndPublications/PressReleases/Pages/7-3-21.aspx