JERUSALEM Feb 19 Israel's banking regulator on
Tuesday imposed tougher mortgage regulations in a move aimed at
reducing banks' housing loan risks in their credit portfolios.
The Bank of Israel said housing credit has surged 76 percent
the past five years along with a rise in home prices.
"The directives are intended to express better the risk
inherent in housing loans on banks' portfolios - both in terms
of capital allocations and in terms of allowance for credit
losses, and thus to strengthen banks' ability to absorb losses
without negatively impacting their ability to provide financing
for the economy's needs," said David Zaken, the central bank's
supervisor of banks.
The guidelines, which were likely to raise mortgage costs to
consumers, also enable banks to increase credit to the
Under the draft measures ordered by the central bank,
housing loans with a loan to value ratio (LTV) of up to 45
percent will remain weighted at 35 percent of the basic capital
adequacy ratio of some 9 percent of a bank's assets.
But loans with an LTV of 45-60 percent will be weighted at
50 percent for capital requirements, up from 35 percent
previously. Loans with an LTV above 60 percent will be weighted
at 75 percent for capital requirements.
The draft guidelines also establish a requirement to
increase the provision for credit losses in housing loans so
that the ratio between the group provision and the balance of
housing loans is at least 0.35 percent, up from around 0.22
percent at the end of the third quarter of 2012.
The central bank issued draft guidelines in 2012 in which
banks will have to hold core capital equivalent to at least 9
percent of their risk-weighted assets by the end of 2014.
Israel's current core capital ratio - a measure of financial
strength - is 7.5 percent, with banks averaging about 8 percent.
(Reporting by Steven Scheer; editing by Ron Askew)