Capital Adequacy and Measurement—the Standardized Approach—Credit Risk

1 Bank of Israel Banking Supervision Department Policy and Regulation Division March 15, 2018 Circular no. C-06-2556 Attn: Banking corporations and credit card companies Re: Capital Adequacy and Measurement—the Standardized Approach—Credit Risk (Proper Conduct of Banking Business Directive no.203) Introduction

1. In view of the enquiries that have accumulated from banking corporations, and after consultation with the Advisory Committee on Banking Business Affairs, and with the consent of the Governor, I have decided to amend this Directive. Changes to the Directive
2. Claims secured by residential property—Section 72 The weights for loans fully secured by mortgages on a residential asset were updated, so that a risk weight of 60 percent was set for loans with an LTV ratio exceeding 60 percent, for loans extended after the publication of this Circular. Explanation We found it proper to reduce the capital allocation required for loans extended from this point henceforth to purchase a home at a high loan to value (LTV) ratio, and thus make it easier for young couples and for homeowners upgrading their home who buy homes with a high LTV. Effective date
3. The changes to this directive shall go into effect with its publication. Update of file
4. Update pages for the Proper Conduct of Banking Business Directive file are attached. Following are the provisions of the update: Remove page Insert page (10/17) [5] 203-1-86 (3/18) [6] 203-1-86 Respectfully, Dr. Hedva Ber Supervisor of Banks