7.12.2005
 
The Banking Supervision Department in a draft circular proposes a six-month transition period for the implementation of the directive regarding credit arrangements
The Supervisor of Banks, Mr Yoav Lehman: "I call upon banks' customers to arrange their credit limits as soon as possible. This will help both the customer and the bank to manage the account properly."
 
In the last few months the Banking Supervision Department has received many reactions and comments from banking corporations and their customers from which it is clear that they are not yet in a position to implement the directive, and that if it goes into effect on the planned date, many problems are likely to arise. Many approaches have also been received from consumers' organizations and organizations representing small business suggesting that the implementation of the directive on the planned date would cause serious difficulties to small business which have not yet made the proper arrangements.
The Banking Supervision Department of the Bank of Israel has therefore today issued a draft circular to the banks in which he declares his intention to allow a six-month transition period for the implementation of the directive. This is not a deferment of the effective date of the whole directive, but some relaxation regarding its implementation in the transition period.
The draft circular, which will be discussed tomorrow a meeting to be held tomorrow with representatives of the banks, contains the following planned relaxations for the transition period:
1. Banks are not obliged to decline debits of customers whose accounts have exceeded the credit limit, and the effective date for this section of the directive has been put back to 1 July 2006.
  Permitting the banks to allow deviations in accounts during the transition period will on the one hand enable the banks to exercise more discretion regarding the return of checks and debits to customers who have not yet arranged the credit limit appropriate to their activity, or who have not yet completed their preparations for it, and on the other hand will give customers more time to complete their preparations.
2. Banks are permitted to make available or renew credit limits in the transition period also to business customers who for special reasons will be unable to complete their financial reports within the maximum period determined in the Supervisor's directive. The purpose of this relaxation is to ease the situation for the business sector, and in particular small businesses, and to avoid causing them a credit shortage that would arise just because of a delay in submitting financial reports to the banks. Nevertheless, the Supervisor stressed that it is essential for banks to receive the reports so that they can manage their credit risks properly, and called on them to continue to ensure that this requirement is met by their business customers.
In the circular the Supervisor emphasized that as a rule, customers shall not be required to have a credit arrangement if they do not need it or want it. This clarification follows complaints received in the Banking Supervision Department with regard to such cases.
The Supervisor also emphasized the importance that he attaches to continued preparation to enable the directive to be implemented fully after the transition period. Accordingly the Supervisor announced today that the Banking Supervision Department will continue to monitor progress in the preparations being made––the proportion of accounts for which appropriate credit arrangements have been made and the number and extent of deviations from the limits in the various banks––and will ascertain that the process of assimilating the new system is proceeding gradually, and that potential problems for customers are being minimized.