Very late, the Bank of Israel was reminded to issue restrictions on contractors' credit.
The reason - the race for tenders and an increase in credit risk in the banking system for the construction and real estate industry, which is reflected, among other things, in the accelerated increase in credit balances and risk characteristics for the industry and in particular in financing corporations
. The
main steps:
Requirement for additional capital allocation for high-leveraged land financing -
banks will be required to increase the risk weight of loans granted and to be purchased for land acquisition, at an LTV rate exceeding 75%.
The Supervisor will provide the banking system with representative examples of underwriting and credit classification processes -
in order to illustrate and demonstrate the process of analyzing the audit teams of the Supervisor of Banks and thereby assist in managing the underwriting and classification of credit at banks. The examples will relate, among other things, to the financing of projects with closed financial support and to the purchase of land.
Expanding the reporting requirements for the supervision of the construction and real estate industry -
Despite the existence of information reported on real estate, it was decided to expand and deepen the information requirements that banks will submit in their supervision reports to enable better monitoring of risk development for these industries.
These three steps will be discussed in the usual consultation procedures and will take effect soon.
The Supervisor of Banks, Mr. Yair Avidan: "In light of the increase in risk appetite and the banking system's exposure to the construction and real estate industry, we have recently instructed banks to hold appropriate discussions on the Board and their managements." Of adequate secretions.
We consider it very important to finance and accompany the real estate industry in the Israeli economy, along with maintaining a risk appetite and a conservative and adequate credit underwriting methodology. We will continue to monitor developments in the construction and real estate market. Additional steps later, as needed. "
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