JERUSALEM (Reuters) – Israeli banks should not resume share payments until at least the fourth quarter of 2021, the country’s banking regulator said Sunday, citing uncertainty about the economy and human health.
The guidance comes as the Banking Investigation Department of the Bank of Israel said it planned to extend capital liquidity requirements more easily until September 30, adding that it expects banks to “use the rest capital to increase credit, not to circulate shares. ”
Yair Avidan, the head of Israeli banking, had said Israeli banks may resume limited installment payments in the second half of the year after they went through a wave of loan delays during the pandemic.
In March last year the central bank suspended shares and bought shares for a year, while reducing capital requirements at commercial banks by 1 percentage point to free up extra money for banks to provide credit. and to cover the loss of any loan.
“The banking system in Israel is strong, and the banks are benefiting from excess capital and liquidity,” the regulator said Sunday.
But despite the rapid COVID-19 vaccination program which is expected to boost economic growth, “the risks involved in the operation of the banking system remain high due to the risk of additional morbidity waves and the certainty that could cause adverse economic impacts. . ”
During the first nine months of 2020, profits at five major Israeli banking institutions slipped to 4.9 billion pence ($ 1.5 billion) from 8.6 billion in the same period in 2019. Meanwhile, loan loss provisions rose to 7.3 billion shekels from 1.6 billion.
However, banks have been able to maintain a ratio of Tier 1 equity capital to risk components of 10-12%. The government has backed lending and the central bank has lent to low-rate banks to boost credit for small businesses. Between 70% to 80% of those who have taken out loans have started repaying.
($ 1 = 3.3284 pence)
Reporting by Steven Scheer, edited by Louise Heavens