The Supervisor of Banks eases capital adequacy requirements by half a percentage point, to allow them to allocate greater credit • Yair Avidan: "Joins additional measures" • Leader Capital Markets: "Banks do not utilize all credit"
Bank of Israel Building
Photography:
Oren Ben Hakon (Archive)
"Against the background of the prolongation of the corona crisis and its implications for the economy, and to continue the support of the provision of credit by the banking system in response to the needs of the economy, the Supervisor of Banks reduces the leverage ratio of banking corporations by half a percentage point." The business. "
This was announced yesterday by the Supervisor of Banks at the Bank of Israel, Yair Avidan.
The Bank of Israel seeks to ensure a response to the growing credit needs due to the corona crisis and the severe damage to businesses and households.
Today, large banks are committed to ensuring that at least 6% of their "risky funds" (credit and other operational risks) are backed by the bank's assets - equity.
Smaller banks are committed to maintaining a 5% ratio between their risky assets and capital.
The Bank of Israel is now reducing this debt to 5.5% for large banks and 4.5% for small banks.
The Bank of Israel explains the matter in the unusual situation we have encountered and in the desire to enable banks to meet the higher-than-usual demand for credit.
The Supervisor of Banks' announcement emphasized that this determination does not facilitate the provision of credit, which should continue to be business considerations between the banks and their customers.
The Supervisor of Banks, Yair Avidan, said: "This step joins a series of steps taken by the Supervisor of Banks since the outbreak of the corona crisis, designed to maintain credit supply in the economy, along with relief for households and businesses. This relief, like other reliefs, has been granted "After a careful examination of the risks and in accordance with accepted international standards for relief during the corona crisis."
According to Yonatan Katz and Lider Capital Markets economists, the money base - banknotes and coins in the market, has increased by 25% in the last year and the amount of money that also includes cash and liquid deposits, including foreign currency and foreign currency deposits - has grown by 20%. Does not increase consumption, nor do the banks use all the credit that the Bank of Israel allocates to them.
However, they predict that "sometime in the future the demand for money is likely to return and affect inflation."
Meanwhile, Leader Capital Markets writes in their review, last week the stock markets recorded the sharpest declines since March, against the background of the rise in US morbidity to 5,910 people last Thursday, the imposition of new closures in Europe, and of course the uncertainty surrounding the upcoming election. However, the economic data was surprisingly positive - in the third quarter US growth was slightly higher than expected, orders for durable goods, personal income and consumption also rose above expectations, and the number of new job seekers fell.
Markets are looking ahead to the moderating impact of rising morbidity and the reasonable possibility of imposing restrictions on U.S. activity, similar to the trend in Europe.
Signs of recovery in Israel
In Israel, signs of recovery are being seen: purchases of credit cards have risen by 20% since the partial opening of the closure.
Work mobility has also risen, as published in Israel Today, and is now only 15% lower than usual.