Overdraft reform to take effect on time

This week, MKs at two Knesset Finance Committee meetings requested either postponement or, at least, gradual implementation of the reform.

December 1, 2005 04:29
1 minute read.


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Supervisor of Banks Yoav Lehman will not back down on the prompt enforcement of the new overdraft directive to be enacted on January 1, 2006, despite several postponement demands from the Finance Committee. Yaakov Litzman, chairman of the Finance Committee, has appealed to the Bank of Israel to delay the timing of the enforcement of the new credit rules since 80 percent of banking customers had not yet formed credit frameworks at their banks and were not yet prepared for the change. This week, MKs at two Knesset Finance Committee meetings requested either postponement or, at least, gradual implementation of the reform. "The banks might try to 'hitch a ride' on the new credit regulations to restrict credit to the disadvantage of the customer," said Litzman. "Banks will be poised to claim that the Bank of Israel had taken away their discretion and, therefore, the Bank of Israel should reconsider its position on the matter, in view of developments on the ground." Under the new directive, banks will have to set a fixed credit facility that clients will only be able to exceed under very special conditions. According to the Bank of Israel, banks will have to set a credit frame for each client that suits his or her needs and ability to repay. "The directive does not determine the credit framework offered by the bank to its customers. The directive will ensure that customers will stay within their credit limits", said Lehman. In light of the concerns, the Bank of Israel said measures would be taken to ease the transition to manage credit frameworks without excessive overdrafts. Within the "adjustment period" the banks will be given tools to help their customers, such as providing one-time credit frameworks or other kinds of loans.

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