Banking system stable, but realestate loans too high, says regulator
Israel’s banking system is very stable, although there are some concerns that banks are underwriting too much in loans to real-estate companies buying land, Supervisor of Banks Yair Avidan said Wednesday.
“From a stability point of view, I am not concerned at all,” he told a news conference after publishing the Bank of Israel’s 2021 annual report.
Nevertheless, the economic environment has changed, with the Ukraine conflict harming the supply chain and rising inflation and interest rates, potentially leading to more defaults, Avidan said.
“The [financial] system right now is in very good shape, even though... two banks didn’t pay
dividends in the first quarter,” he said.
Of Israel’s five largest banks, two opted against a quarterly dividend. One is paying 50% of net profit, and two others will pay 20%, citing the need to retain capital for growth.
Israel’s top five banks combined earned a profit of NIS 5.7 billion ($1.7b.) in the first quarter, compared with NIS 4.3b. a year earlier on the heels of higher inflation that boosted financing income.
Earlier, the banking regulator issued a directive to banks to allocate more capital for financing land purchases for construction to minimize risk. Banks must allocate 100% capital on loan values of up to 80% and 150% capital above 80%.
Avidan said he was more concerned by the culture and not the marginal risk of the loan.
To boost competition in the banking sector, another online bank is in the pipeline for approval after Digital Bank began operations last year.
(Reuters)