The Banking Supervision Department instructs the banking system to analyze the risk of credit to the motor vehicles industry
As such, the Banking Supervision Department has instructed the banking corporations and credit card companies to analyze the credit risks to the “motor vehicle sales” industry and of consumer credit for the purchase of motor vehicles.
The risk analysis will be done through various scenarios that may affect the industry, such as an increase in the interest rate and a decline in the value of collateral. Based on the results, the banks and credit card companies will be required to examine the need for revising credit policy to the industry and the need for tighter controls regarding existing significant borrowers and regarding consumer credit for motor vehicle purchases.
In addition, the banks have been sent accepted practices for industry financing through the Israeli banking system, with an emphasis on the leasing industry, such as setting a maximum ratio of 60 percent between the value of the vehicle and the value recognized as collateral for the loan, and a determination that the value of vehicles should not be relied upon as collateral beyond 5 years. These practices are not binding, but it is expected that each banking corporation and credit card company will examine its risk appetite in relation to them.
It should be noted that some of the banks and credit card companies are already implementing a close credit policy in the motor vehicle industry, and are acting in accordance with the accepted practices in financing to the industry. In this regard, it is the Banking Supervision Department’s objective to have these practices implemented throughout the banking system.