Bank of Israel aims to ease household, business cash constraints

"At this time, our role at the Bank of Israel is to help achieve the correct balance in the financial system," said Bank of Israel Governor Prof. Amir Yaron.

By EYTAN HALON
A woman uses an automated teller machine (ATM) outside a Bank Hapoalim branch in Tel Aviv, Israel May 30, 2013 (photo credit: REUTERS/NIR ELIAS/FILE PHOTO)
A woman uses an automated teller machine (ATM) outside a Bank Hapoalim branch in Tel Aviv, Israel May 30, 2013
(photo credit: REUTERS/NIR ELIAS/FILE PHOTO)
The Bank of Israel rolled out a set of regulatory relief measures and services to the public on Sunday, seeking to ease the financial burden on businesses and households struggling due to the novel coronavirus pandemic.
Following a request by Bank of Israel governor Prof. Amir Yaron and supervisor of banks Dr. Hedva Bar, retail banks will be permitted to offer: mortgage deferrals for several months; loans to small and medium business owners facing cash flow shortages; bank deposits taking into account current market volatility; increased digital services for account management; and courier services for customers in quarantine.
In addition, the central bank said it would purchase government bonds and maturities in the “necessary quantities needed to ensure the smooth functioning of the government bond market.” The bank will also offer repurchase agreements to financial institutions with government bonds as collateral.
“At this time, our role at the Bank of Israel is to help achieve the correct balance in the financial system,” said Yaron. “If every bank eases their credit policies even slightly, it will help to overcome cash flow problems that are likely to affect companies with healthy economic activity, and the economy will overcome the interim period and grow even faster - which will justify the policies advanced by the banks in retrospect.”
In accordance with regulatory relief measures published by the Banking Supervision Department on Sunday, a series of additional measures are likely to enter into effect in the coming days.
The measures include the easing of restrictions on mortgages granted to households for any purpose, up to the value of 70% of the value of the property. To ease cash flow shortages and prevent bounced cheques, banks will also be permitted to unilaterally increase overdrafts for customers under the same conditions as existing limits. For the construction sector, fearing delays and a shortage of workers, banks will also be able to increase credit offered to construction companies by a total of some NIS 15 billion.
While establishing remote banking operations have only been permitted at the customer’s initiative to date, banks will now be able to proactively offer remote banking to their customers, enabling transactions via telephone, internet or smartphone applications.
“The banking system in Israel is robust and, as a result, is ready to support and assist its customers at this time,” said Bar. “I emphasize that there is no fear of damage to essential banking services, and the banking system is ready to continue providing services, even if the situation significantly deteriorates and restrictions on movements become more severe.”
To ensure continued cash availability at ATMs and reduce the frequency of customer withdrawals, the Bank of Israel has temporarily changed the permitted denominational mix of banknotes in machines, increasing the quantity of NIS 100 and NIS 200 notes.
In another move to ease business cash flow, Finance Minister Moshe Kahlon and Israel Tax Authority director-general Eran Yaacov reached an agreement to postpone this month’s VAT return deadline from March 16 (Monday) until March 26.
Accountant-General Rony Hizkiyahu said he had instructed banks to offer mortgage deferrals for up to four months, without requiring borrowers to visit their bank branch.
"Due to the consequences of the coronavirus crisis, we instructed the banks to enable a deferral of mortgage payments for eligible individuals, in order to help them manage in the near term and maintain their regular sequence of payments," said Hizkiyahu.
Also on Sunday, the government authorized Labor and Welfare Minister Ofir Akunis to implement emergency workforce regulations if a state of emergency is declared, including the power to sign an order requiring workers to staff critical factories. The authorization is valid for a period of 90 days.
Approximately 13% of Israel’s employees are said to work in factories and industries defined as critical by the Economy Ministry’s emergency administration division for maintaining security or vital supply needs.


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