Supervisor of Banks Yair Avidan made a presentation today to the Knesset Finance Committee regarding the Banking Supervision Department’s activity during the COVID crisis and the many measures adopted by the Department with the objective of assisting the general public in dealing with the ramifications of the crisis.
In opening his remarks, the Supervisor noted that when the crisis hit, the Israeli banking system was strong and was prepared to absorb a large crisis, with the ability to support the Israeli economy. This was partly due to the fact that the Banking Supervision Department prepared during normal times for emergencies, and the fact that it had internalized the lessons of the 2008 crisis and implanted them in the banking system.
The Supervisor then presented the many measures adopted by the Banking Supervision Department during the crisis, including measures to maintain the business and functional continuity of the banking system, and measures that led to an increased supply of credit and prevented an increase in the interest rate despite the increase in risk. The Supervisor also discussed various processes led by the Banking Supervision Department to provide households and businesses with access to banking services, while emphasizing assistance to weaker population groups.
The Supervisor also discussed the outline for deferring loan repayments, which was recently extended until the end of the year, and noted that up to October 23, 2020, payments on about 820,000 loans had been deferred, totaling NIS 10.4 billion. The Supervisor for the first time presented a breakdown showing the percentage and value of loans where payments had been deferred and then resumed in various segments as of the end of September. The figures show that payments have resumed for about 55 percent of loans with payments that had been deferred. At the peak of the program, about 15 percent of the entire bank credit portfolio was defined as “deferred”, and as of the end of September, the rate is about 6.8 percent. The Supervisor emphasized that a comprehensive thought process is currently underway regarding what will follow the outline, and he called on banks and customers to continue preparing for the day after the loan payment deferrals and to arrange how the loan will be repaid.
In conclusion, the Supervisor related to the fact that the COVID crisis is dynamic and features a great amount of uncertainty, and the Banking Supervision Department therefore holds ongoing situation assessments with the aim of adjusting the measures being taken to the crisis situation at that time. Since the beginning of the crisis, the Banking Supervision Department has made broad use of the tools available to it in order to minimize the damage to households and small businesses, alongside informed and responsible risk management. It will continue this work with a values-based and practical view that we must make things easier for customers as much as possible during this period. The banking system is strong, and it will continue operating to support the measures necessary for the good of the economy and the public, and it is important that the Bank of Israel and all branches of government continue to act through a variety of tools to assist businesses and households.