Report on the Distribution of Total Credit Risk by Industry (Quarterly)

Bank of Israel Supervision of Banks Department Policy and Regulation

P.O.B. 780, Jerusalem 91007 Tel: 02-6552475 Fax: 02-6524590

Jerusalem, 9 April 2014

Circular No. 2420 - 06-H

To: Banking Corporations and Credit Card Companies

Subject: Report on the Distribution of Total Credit Risk by Industry (Quarterly)

Directive No. 831 (Reporting to the Supervisor of Banks)

Introduction

1. The reporting instructions for uniform classification by industry were amended effective 9.4.2014 in Circular No. 2419-06-H. This change replaced the classification (hereinafter: the 2011 Classification) of the Central Bureau of Statistics (hereinafter: the 1993 Classification) of 1993. Consequently, there was a need to also update Directive No. 831 (Report on the Distribution of Total Credit Risk by Industry).

Amendments to the Instructions

2. Directive No. 831 – Report on the Distribution of Total Credit Risk by Industry (Quarterly): The appendix (Industry Classification) was updated on page 831-3 with the list of industry codes and their adaptation to the Central Bureau of Statistics' 2011 Standard Classification of Economic Activities.

3. The list of industries was also updated and adapted in accordance with the above. The appendix tables 04-01 were updated according to the 2011 Standard Classification of Economic Activities.

Transition and Effective Date

4. The effective date of these amendments is 1.1.2015. It is recommended to retain the existing instruction pages until the amendments enter into force.

5. Transition instructions were established in Circular No. 2419-06-H dated 9.4.2014 to adapt the reporting instructions to the 2011 Classification.

Main Changes in Directive 831

6. The main changes in Directive 831 are detailed below.

7: Mining and Quarrying

a. A new appendix will be added to Directive 831 (hereinafter: the new appendix) - "Mining and Quarrying". This is because the "Industry" category in the 1993 Classification was split into "Mining and Quarrying" (Section B in the 2011 Classification) and "Manufacturing" (Section C in the 2011 Classification).

b. Due to differences in characteristics between the sectors, separate reporting will be required for "Chemical Industry" into the sectors "Pharmaceuticals" and "Petroleum Products" according to the main sectors of the Central Bureau of Statistics.

c. In place of the main industry name "Building Products" in the "Industry" category (in the existing appendix), the name "Non-metallic Building Products" will be used in the new appendix.

d. The following main industries will be omitted from separate reporting due to lack of materiality: "Wood and its products", "Textiles and Clothing", and "Publishing, Printing and Reproduction of Recorded Media".

8: Electricity and Water

In accordance with the 2011 Classification and due to differences in risks, the existing "Electricity and Water" category in the appendix was split into the following categories in the new appendix:

a. Supply of electricity, gas, steam and air conditioning.

b. Sewerage; water supply; waste collection, treatment and disposal activities.

9: Trade

Separate reporting will be added to the "Trade" category on the main industry "Wholesale and Retail Trade of Motor Vehicles" including the sub-industry "Rental and Leasing of Motor Vehicles" (Sub-sector 771 of the 2011 Classification) which is included in the "Support Service Activities" (Section N) category.

10: Information and Communication Services

The "Information and Communication" category will be added to the new appendix in accordance with the 2011 Classification, replacing the existing "Computer and Communication Services" in the appendix. Due to differences in risks within this category, a breakdown by main industries will be added to this category as follows:

a. Telecommunication services (including radio and television broadcasting).

b. Computer programming (including consulting in the field of computers).

11: Financial Services

Due to material differences in risks and credit risk, a breakdown will be added within the "Financial Services" category as follows:

a. Institutional bodies.

b. Holding companies.

12: Additional Information on Local Authorities and Settlement Movements

a. Additional disclosure on "Settlement Movements" will be omitted due to materiality considerations.

b. Additional disclosure on corporations controlled by local authorities will be omitted due to materiality considerations.

Disclosure on local authorities will now be provided as an additional breakdown for the "Public and Community Services" category. This includes the expected repayment when the corporation is controlled by a local authority (classified according to the main activity of the local authority). The local authority is not primarily based on the activity of the corporation.

13: Change in Industry Definitions

The 2011 Classification updates the structure of classification categories and their definitions. A review of the main changes between the 1993 and 2011 Classifications is included in the fundamental principles of the 2011 Classification. In Section 5 of the Introduction, banking corporations are required to adapt their reporting to the 2011 Classification. The reporting instructions were amended accordingly in Circular No. 2419-06-H dated 9.4.2014 to the 2011 Classification.

14: Appendix "Ratz" (Comparison of the 2011 Classification with the 1993 Classification)

Section 6 of the Introduction of the 2011 Classification (from Appendix "Ratz") contains a comparison of the 2011 Classification with the 1993 Classification at the category level.

Questions and Clarifications

15. Questions and clarifications regarding the tables in the reporting instructions should be directed to the Reporting Supervisor at Extension 803.

(Bank of Israel)

Update Files

16. The pages of the updated file of the "Reporting Instructions to the Supervisor of Banks" are as follows:

Insert Page	Remove Page
(4/14) [21] 831-1-8	(1/13) [20] 831-1-8
(4/14) [4] 897-55	(3/14) [3] 897-55

Sincerely,

Aurora Soffer Deputy Supervisor of Banks

Appendix Comparison between the 2011 Classification and the 1993 Classification