Reporting to the Banking Supervision Department Directives

Bank of Israel Policy Department of Banking Supervision and Regulation

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

Jerusalem, 2 Kislev 5774 November 13, 2013

Circular No. 2402-06-H

To: Banking Institutions and Credit Card Companies

Subject: Reporting to the Supervision Department Instructions

Introduction

1. Following the adoption of the Basel III recommendations, effective from 1.1.2014, amendments were made to the instructions prepared under the banking procedure. Instruction No. 838 "Quarterly Report on Capital and Solvency Measurement" is hereby amended. Several amendments and clarifications have been introduced in light of accumulated experience.

Amendments to the Instructions

2. The following changes apply to Instruction No. 838 – Quarterly Report on Capital and Solvency Measurement:

a. The column "Last Tier 1 Capital Required (8%)" is deleted from Tables 11-1.

b. After row 06 in Table 10-16, row 10 "Conversion Factor 10%" will be added. (New numbering: 11-17 will now be the old numbering).

c. In Table 10 "Credit Risk", a risk weight of 1250% is added for "Securitization Credit Risk" in accordance with Section 205 of Instruction No. 1250. "Securitization" exposures that were previously deducted from capital will now receive a risk weight of 1250% (rows 22 and 28).

d. In Table 11 "Credit Risk - Other Assets", sections for risk-weighted assets of 250% and 1250% are added in accordance with Instruction No. 202 "Regulatory Capital" (rows 05-10 and 17-18). (New numbering).

A new row 12 "Off-Balance Sheet Exposures Not Included in Tables 01-10" is added.

e. In Table 13 "Market Risk Capital Requirement - CVA Risk", capital allocation for "CVA Risk" is added in accordance with Sections 97-105 of Annex 2 to Instruction No. 203 "CVA Risk".

f. In Table 15 "Capital Base - Reporting to the Solvency and Capital Measurement Report", the "Regulatory Capital" Instruction No. 202 is adapted. A new column 2 "Amounts Not Deducted from Capital" is added to report amounts not deducted from capital (subject to treatment required before adoption of Instruction No. 299 "Transitional Provisions" in accordance with Instruction No. 299).

3. Basel III

g. In Table 16 "Central Counterparty - Asset Risk CVA Risk", a new row 15 is added. Rows are added for own funds level 1 based on the capital ratio and the ratio determined by the supervisor (rows 18, 20, and 22 respectively).

Effective Date

3. These amendments to the instructions take effect from the reporting date of January 1, 2014 (effective date 31.3.2014).

Questions and Clarifications

4. For questions and clarifications regarding the tables in the Reporting to the Supervision Department Instructions, please contact directly via Instruction No. 803 "Reporting".

File Update

5. The following pages of the "Reporting to the Supervision Department Instructions" file are updated for banks:

Page Insert Page Remove (11/13) [4] 838-1-23 Various versions 838-1-24 *(7/13) [4] 897-53 (7/13) [4] 897-53 (11/13) [3] 897-54 (7/13) [2] 897-54

• This page was reprinted but not updated, following the transition to double-sided printing.

Respectfully,

Ora Soffer Deputy Superintendent of Banks