Just weeks before the new overdraft directive comes into effect on July 1, the country's major banks are providing a mixed picture as to just how ready the public is for the overhaul.
"We are prepared for the change, but it is hard to change the culture and mentality of Israelis in a short period of time," said a spokesperson for Bank Hapoalim. "More and more customers are coming into the bank to arrange credit frameworks, but not enough. People will not understand until July 1 when checks will be bouncing back."
Under the new directive, banks have to set a fixed credit facility, which clients will only be allowed to exceed under very special conditions.
At the end of last month the Supervisor of Banks, Yoav Lehman, said the Bank of Israel had sent letters warning all banks that their state of preparedness was unsatisfactory.
"We intend to publish the banks' feedback on accounts, which will be in excess of their credit limit and credit framework arrangements that hadn't been arranged, post July 1," Lehman said at the time.
The supervisor urged the banks' customers and, in particular business customers, to arrange their credit limits with the banks since little progress was made in April regarding credit arrangements and reducing excess credit.
"It is preferable to arrange matters in time, after checking offers from other banks, rather than reaching a no-choice situation at the last moment which will certainly make customers choose more expensive alternatives to settle the excess credit," he said.
According to the latest data provided by the Bank of Israel, of the nearly 5 million bank accounts in Israel's five major banks, just over 3.2 million current accounts and overdraft facilities require the establishment of the new credit limit (2.8 million private accounts and 396,000 business clients), including accounts in which clients are permitted to go into overdraft even if they do not actually do so.
"Until now Israel Discount Bank has arranged 98% of credit lines for customers who are in need of credit lines their accounts," Israel Discount Bank informed The Jerusalem Post.
Bank Leumi, meanwhile, confirmed that more and more customers were coming into the bank's branches to sign up for credit frameworks but said those making the arrangements weren't necessarily those most in need to do so.
"The rate of arrangements of credit frameworks within the group of account holders where the credit limit is exceeded looks less promising. We expect a hard week, when the directive will be implemented on July 1," the Leumi spokesperson said.
Bank of Israel data for the month of April showed the share of accounts in which the credit limit was exceeded did not change, remaining very high at 23% of all accounts, 21% of private accounts and 38% of business accounts.
Dun & Bradstreet Israel, the business information company, told the Post that during the "adjustment period" which began in January after implementation of the directive was postponed, the potential threat or risk of closure of Israeli businesses in every sector of the economy was up three percentage points to 22%.
"In particular, small shop owners, more so in the periphery, and contractors are already affected and thus exposed to the potential risk of closure once the directive is implemented," said Ella Fried, head of D&B's analytical section.
Small and medium-sized businesses in Israel are subject to credit problems, which affect their ability to survive and realize their potential to expand, and those issues still exist for some of them, D&B noted.