Israel's banking regulator has requested commercial banks in Jerusalem to allocate up to 3 billion shekels ($841 million) by 2026 to provide relief for retail customers and improve interest terms for clients affected by the ongoing 16-month old war.
The Bank of Israel's latest proposal suggests that banks set aside 1.5 billion shekels annually in 2025 and 2026 for various relief measures for retail customers. This amount aims to strike a balance between substantial relief for those impacted by the war and maintaining stability within the banking system.
Following the attacks by Palestinian militant group Hamas in October 7, 2023, which sparked the conflict and led to economic hardships for many families, particularly in border towns near Gaza and Lebanon, banks have implemented several central bank initiatives to ease loan conditions for affected individuals.
The plan aims to assist reservists, evacuees from conflict zones, and families of war victims in light of "current geopolitical uncertainty, economic challenges, and the high profitability of banks," subject to adjustments based on evolving circumstances.
Moreover, the Bank of Israel urges the banking sector to embrace the proposed program principles to address the current challenges effectively.
In addition to allocating funds, the central bank requires banks to lower interest rates on negative balances, offer benefits on accounts with positive balances, and automatically transfer funds from current accounts to interest-bearing accounts. Simultaneously, banks are permitted to distribute quarterly dividends amounting to 40% of net profit.
Banks must disclose the actual relief provided in financial reports, subject to audit by the central bank.
Israel's banks have faced public and legislative criticism for significant profits from elevated mortgage and loan rates since 2022, amid consumer financial strain due to the cost of living.
Upcoming fourth-quarter results from banks will be disclosed on Thursday.
A report from the Israel Democracy Institute on Tuesday indicated that approximately 20% of evacuees forced to leave their homes following the October 7, 2023 attack have lost their jobs.
Since the conflict started, tens of thousands of Israelis have been evacuated from regions near the Gaza and Lebanese borders.
The survey highlighted that around one-third of Israeli households experienced income decline during the war, with 72% of evacuees benefiting from housing payment relief.
($1 = 3.5664 shekels)