Bank of Israel Supervision and Regulation Department Policy Tel: 03-5640520 : Fax: 03-5661110 528 P.O.B, Tel Aviv-Yafo 61004

Supervisor of Banks Reporting Instructions to Banks: Annual Monetary Report 661-15.1 Fees and Non-refundable Costs

10.2.2 A banking entity originating a loan (including acquiring a loan from another party or originating the loan through the borrower) may incur fees and non-refundable costs related to the activities attributed to the granting of loans and the acquisition of loans. This section regulates the accounting treatment and reporting of such fees and non-refundable costs.

These are generally divided into two categories: (a) Efforts required to identify potential borrowers and draw down funds (disbursement of funds); (b) Efforts required to create a loan or loan commitment (originating the loan) after a potential borrower has requested a loan or loan commitment.

Fees and non-refundable costs include, for example: origination fees, points, placement fees, application fees, commitment fees, fees for reorganizing, management fees, syndication fees, and credit card arrangement fees. For the purposes of this section, these are considered fees, but not commitment fees or syndication fees.

10.2.3 Credit card arrangements include available credit lines similar to credit card arrangements and credit card fees collected in connection with such cards. These are considered in part as commitment fees (credit card fees). Banking entities issuing credit cards (including other similar cards and bank charge cards) may charge an origination fee, a fee for issuing the credit card, a periodic renewal fee, or a fee for extending the rights granted by the credit card as part of sales promotion. These issuers may waive the payment of credit card fees to retain existing cardholders or acquire new ones, for a specific period or in certain cases, or for a longer period. Other banking entities issuing credit cards do not require any fee for the use of the credit card.

10.2.4 A banking entity (credit card issuer) may acquire credit card accounts (may acquire credit card accounts). Typically, these are credit card accounts with no outstanding balances that have not yet been paid off.

Supervisor of Banks Reporting Instructions to Banks: Annual Monetary Report 661-15.2 Fees and Non-refundable Costs

10.3 Specifically acquired credit card accounts. At the time of acquisition, the banking entity may pay an amount for each approved credit card agreement (approved credit card agreement) to a third party, which may be: a. A direct marketing specialist. b. An affinity group (affinity group) (a professional or cultural organization). c. A co-brand (cobrander) (an airline, car manufacturer, hotel, or other commercial or retail entity). Under a co-branding arrangement, the third party appears on the credit card and continues to provide products, services, or goods or other benefits (benefits) to the cardholder, directly or indirectly, for an extended period, for the issuer of the credit card.

10.3.1 Exclusions from Scope Not included.

10.3.2 Transactions The guidance in this section explicitly includes the following transactions: a. Recognition and classification of fees and non-refundable costs on the balance sheet related to loan origination activities. b. Accounting treatment of premiums, discounts, commitment fees, and other fees and non-refundable costs related to the acquisition of loans, such as other debt and securities, government debt, pass-through certificates, and other loans including mortgage-backed securities (other loans called securitized loans). c. Loans designated as hedged items at fair value through profit or loss in accordance with Part 1' of the Reporting to the Public Instructions.

The guidance in this section does not apply to the following transactions: a. Loan origination fees, commitment fees, and fees for credit that become fees for non-refundable costs when the guidance in this section is applied to them. b. Costs incurred by the banking entity in transactions with unrelated third parties, depending on whether the banking entity directly charges the borrower for these costs. c. Fees and non-refundable costs related to the acquisition of loans reported at fair value through profit or loss, or at cost or fair value through profit or loss, whichever is lower. d. Costs and fees related to commitments (commitment) to originate loans, which are treated as accounting derivatives in accordance with Part 1' of the Reporting to the Public Instructions. e. Costs and fees related to standby commitments (standby commitment) if it is not likely that the banking entity will have the ability to acquire the loans within a reasonable period of time before the settlement date of the commitment (commitment) without accepting delivery (accept delivery) of the loans.

10.3.4 The following table describes the application of this section to different types of assets:

Type of Asset	Accounting Treatment	Applicability of Section
Debt securities or loans held to maturity, at amortized cost or historical cost		Yes
Loans held for sale, at fair value or cost, whichever is lower		Yes
Debt securities or loans not at fair value through profit or loss, including gains and losses in trading		No
Debt securities or loans available for sale, at fair value through profit or loss, including gains and losses in other comprehensive income		Yes
Debt securities classified as available for sale (2) including financial assets available for sale (1) for early repayment		Yes

10.3.5 The guidance in this section applies separately to each loan contract regarding a number of other issuers. For the purpose of recognition of net fees or net costs or premiums, similar loans are grouped together as defined in Section 21.14 of the Reporting to the Public Instructions.

Supervisor of Banks Reporting to Banks: Annual Monetary Report 661-15.4 Fees and Non-refundable Costs

10.4 List of Terms Included in Section 1 310-20-20.10.4

10.5 Recognition 310-20-25.10.5

10.5.1 Section 10.5 deals with the recognition of certain fees and costs related to loan origination: a. Loan origination fees and directly related loan origination costs. b. Other costs related to loan origination. c. Cost determination. d. Commitment fees. e. Credit card fees and credit card costs. f. Loan syndication fees (Loan syndication). g. Loan group or loan acquisition. h. Unrelated third parties.

10.5.2 Loan origination fees and directly related loan origination costs Loan origination fees, similar to directly related loan origination costs, shall be deferred.

10.5.3 Other costs related to loan origination All other costs related to loan origination, including activities conducted by the banking entity for publication purposes, soliciting potential borrowers, servicing existing loans, establishing credit policy, monitoring and management, employee compensation and benefits, and other related activities, shall be expensed as incurred. These activities are not efforts to originate loans. "Idle time" and occupancy costs, rent, depreciation, general and administrative expenses, and equipment and software costs are considered indirect costs and shall be expensed as incurred.

10.5.4 Definition of Directly Related Loan Origination Costs Costs related to processing loans intended for deferral as directly related loan origination costs are not other costs related to loan origination. These costs are not incurred for activities other than originating that loan, as specified in the definition of the term.

10.5.5 Definition of Directly Related Loan Origination Costs Costs paid to a law firm for services related to processing loans intended for origination are not eligible for deferral as directly related loan origination costs. These are not costs incurred after the loan has been placed, due to the services performed.

10.5.6 Definition of Directly Related Loan Origination Costs Bonuses based on the successful placement of loans and paid to employees involved in the activities are partially deferrable as directly related loan origination costs. The portion of the compensation that constitutes bonuses is not part of the employee's total compensation. The portion of the employee's total compensation that is directly identified with the time spent on the activities specified in the definition of the term that caused the loan origination is deferrable as directly related loan origination costs.

10.5.7 Definition of Directly Related Loan Origination Costs If employee compensation is typically paid by salary or hourly wage in full, these costs are partially deferrable as directly related loan origination costs related to the successful placement of loans in part or in fees. Only the relative portion of the total compensation related to the employees' time spent on the activities specified in the definition of the term for this purpose is deferred. This applies to compensation arrangements between banking entities and their employees, and similar arrangements may exist between banking entities and unrelated third parties, such as loan brokers (loan brokers). When activities related to loan origination are conducted by the banking entity's employees, the banking entity must allocate compensation costs to the activities specified in the definition of the term on a relative basis of the time spent by the employees between origination activities and other activities related to loan origination. This term is deferred only for loans completed, even if the fees constitute 100% of the compensation based on completed loans.

10.5.8 Cost Determination This section does not specify how to determine costs. In many cases, it is possible to use standard costing (standard costing) to defer costs in accordance with the conditions of this section. The cost of origination for certain loans may be similar to other loans, while costs for other loans may be identifiable separately for borrowers. Methods may be used in conjunction with any system to provide adequate information for reporting purposes. The development of a standard costing system is mandatory. If necessary, periodic variance analysis (variances) may be required to adjust the estimates of standard costing methods. Standard costs include costs attributed to transactions performed to measure.

Actual costs (actual costs), standard costs (standard costs), job process (job process), job order (job order), homogeneous loans (homogeneous loans), specific loans (specific loans), for example.

10.5.9 The accounting achievement of the successful efforts method The use of standard costing may cause the banking entity to not accurately reflect the amount of costs related to loan origination efforts. In accordance with the conditions of this section, costs that can be deferred and reduced may be determined as a percentage of activities (function), such as submission, valuation, underwriting, verification, application, etc., adjusted for each activity, for unsuccessful efforts and time spent on activities not related to them, and for idle time, which are deferrable.

10.5.10 Accounting treatment for costs related to loan origination before the loan is originated In order to evaluate the number of loans to be closed (closed), judgment is required. Costs of successful loan origination can be deferred until the loan is closed or considered successful. If a loan is in the process but has not yet been approved before the balance sheet date, it is determined as unsuccessful effort. Then, costs deferred until the balance sheet date are expensed in the period ending with the balance sheet date.

10.5.11 Commitment Fees Commitment fees received for creating a commitment are deferred in accordance with Section 10.7.3, specifically for loan groups or loan acquisition.

10.5.12 Directly related loan origination costs incurred as a result of placing a loan commitment are netted against the commitment fee and recognized in accordance with Section 10.7.3.

10.5.13 Costs related to commitments for which commitment fees are applicable. The determination of the net cost (whether a fee was charged or not) depends on the probability of the commitment being exercised. This section defers these items, along with fees and non-refundable costs in Sections 10.5.1 and 10.7.3. If the probability of the commitment being exercised is remote, the net costs are expensed immediately and not deferred on a straight-line basis over the commitment period.

10.5.14 Fees received for issuing commercial letters of credit (commercial letters of credit) are considered commitment fees and are treated in accordance with this section and the accounting treatment specified in Section 10.7.3, credit.

Supervisor of Banks Reporting Instructions to Banks: Annual Monetary Report 661-15.7 Fees and Non-refundable Costs

10.5.15 Credit Card Fees and Credit Card Costs Credit card fees are generally provided in the form of various quotas of services available to cardholders. Accordingly, periodic fees charged to cardholders are deferred. This accounting treatment also applies to similar arrangements involving the extension of credit (extension of credit) by the card issuer.

10.5.16 Only origination costs eligible for deferral as directly related loan origination costs are eligible for deferral. All other costs shall be expensed as incurred. Therefore, costs likely (likely) to be eligible for deferral shall be expensed as incurred. Only fees when a credit card is first issued.

10.5.17 Origination costs for credit cards are netted against the fee related to the card. If significant fees are charged in cases where there is a significant period (the privilege period) during which the fee grants the cardholder the right to use the credit card, this period is estimated to be one year for this purpose. If no significant fee is charged, the related costs are estimated based on the fee amount relative to the related costs.

10.5.18 Accounting treatment for acquired credit card accounts (accounts) In accordance with this section, the treatment is specific to the acquisition of accounts, similar to the treatment of loan origination (originations). Amounts paid to a third party for the acquisition of credit card accounts are deferred and netted against the credit card fee, if applicable.

10.5.19 Loan Syndication Fees (Loan Syndication Fees) The banking entity organizing the loan syndication (the syndicator) recognizes fees on the portion of the loan retained by the syndicator, unless the loan is completed at the time of syndication. If the syndicator retains a portion of the loan created in the syndication, the yield on the retained portion is lower than the average yield on the portion of the loan transferred to the syndication participants. After the fees brought into account by the syndicator, the syndicator defers the portion of the syndication fee such that the yield on the retained portion does not fall below the average yield on the loans held by the other syndication participants (held by).

10.5.20 All transactions structured as legal syndications of loans are treated as accounting syndications in accordance with the conditions of this section.

10.5.21 Not included.

10.5.22 Loan Group or Loan Acquisition Section 10.6.5 clarifies that the initial investment in a loan acquired in a group or acquired is included in the amount paid to the seller plus all fees received, less any fees received. The investment in acquired loans is often close to the difference in the loan principal amount at the time of acquisition.

10.5.23 Costs incurred in connection with taking on a commitment to acquire loans or loan origination as a cost of origination or fee of origination are not appropriate for acquired loans, as the acquired loan has already been created by another party. Costs incurred in connection with taking on a commitment to acquire loans or loan origination, including costs related to loan participation (participation), shall be expensed in accordance with Section 10.7.15.

10.5.24 For the originating lender (the originating lender), the net costs and fees attributed to participation in the loan will be a component of the remaining investment in the loan and will be used to calculate the subsequent gain or loss on the sale of the loan as described in Section 10.7.16.

10.5.25 Unrelated Third Parties If a banking entity uses a third party to create loans, the banking entity shall defer those related costs, even though the third party is not considered dependent for several reasons. It can be determined that they meet the criteria for specific activities directly related to loan origination costs. All other costs incurred for purposes other than this loan are not eligible for deferral under the definition of the term.

10.5.26 Fees paid to unrelated third parties for consulting services are not considered directly related loan origination costs, even if the activities are conducted in the same specific activities determined for internal purposes. They are expensed as incurred, whether paid to unrelated third parties or incurred internally.

10.5.27 Fees paid to an unrelated third party or incurred internally for management of investments or consulting are considered other costs related to taking on a commitment to acquire loans or loan origination, as they constitute investment consulting costs, not costs for loan origination. Therefore, these costs are expensed in accordance with Section 10.7.15, whether paid to third parties or incurred internally. Judgment is required to determine if the third party is dependent in certain circumstances.

Supervisor of Banks Reporting Instructions to Banks: Annual Monetary Report 661-15.9 Fees and Non-refundable Costs

10.6 Initial Measurement 310-20-30.10.6

10.6.1 General Section 10.6 deals with the measurement of certain types of fees and costs related to loan origination, specifically: a. Loan origination fees and loan origination costs. b. Syndication fees. c. Loan group or loan acquisition.

10.6.2 Loan Origination Fees and Loan Origination Costs Loan origination fees for a loan and directly related loan origination costs are netted and only the net amount is offset.

10.6.3 Loans with an interest rate higher than the recorded net investment in a loan (the recorded net investment in a loan) may be higher than the amount (premium) resulting from the acquisition, if the borrower can settle the commitment. Eligibility for deferral of costs from loans (acquired loans) or fees from loans (loans) is not higher.

10.6.4 Syndication Fees Section 10.5.19 clarifies that if the yield on the portion of the loan retained by the syndicator is lower than the average yield on the portion of the loan transferred to the other syndication participants, the syndicator defers the portion of the syndication fee such that the yield on the retained portion does not fall below the average yield on the loans held by the other syndication participants.

10.6.5 Loan Group or Loan Acquisition The initial investment in a loan acquired in a group or acquired includes the amount paid to the seller plus all fees received, less any fees received for the acquired loans. In applying the conditions of this section, the purchaser may allocate the initial investment to each loan as a group or separately, or treat the initial investment as an aggregate.

10.7 Subsequent Measurement 310-20-35.10.7

10.7.1 General Section 10.7 deals with issues of measurement of certain types of fees and costs related to various ways of granting loans, specifically: a. Loan origination fees and loan origination costs.

Supervisor of Banks Reporting Instructions to Banks: Annual Monetary Report 661-15.10 Fees and Non-refundable Costs

b. Commitment fees and commitment costs. c. Credit card fees and credit card costs. d. Loan refinancing or restructuring. e. Loan group or loan acquisition. f. Other matters related to the effective interest rate method. g. Estimate of early repayments of principal. h. Transactions other than loan origination related to loan origination. i. Loans with a variety of interest rates.

10.7.2 Loan Origination Fees and Loan Origination Costs Loan origination fees deferred in accordance with Section 10.5.2 are recognized over the life of the loan as an adjustment to yield (interest income), similar to directly related costs. Loan origination costs deferred in accordance with this section are recognized as a reduction in yield. In the case of restructuring (Section 10.7.12), Section 10.6.2 clarifies that loan origination fees and loan origination costs are netted and only the net amount is offset for a given loan. It is reduced.

10.7.3 Commitment Fees and Commitment Costs Commitment fees received for creating a commitment are recognized in accordance with Section 10.7.3, specifically for loan groups or loan acquisition. If the commitment is realized, or if the commitment expires without being realized, gains or losses are recognized in the profit and loss statement. If the banking entity's experience with similar arrangements indicates that the probability of the commitment being exercised is remote, the commitment fee is recognized on a straight-line basis over the commitment period. If the commitment is realized during the commitment period, the remaining commitment fee is recognized as income at the time of realization, consistent with the definition of "remote" mentioned above, over the life of the loan. Section 47 of the Reporting to the Public Instructions.

If the commitment fee amount is determined retroactively as a percentage, and if this percentage is insignificant and the credit was not utilized in the prior period and is not available, and if the loan bears interest at a rate related to the nominal rate, then at the time of loan placement, the loan shall bear the market interest rate. The commitment fee is recognized as income at the time of determination.

Supervisor of Banks Reporting Instructions to Banks: Annual Monetary Report 661-15.11 Fees and Non-refundable Costs

10.7.4 Credit Card Fees and Credit Card Costs The following guidance deals with the reduction of deferred origination costs with or without fees, when waiving fees for a limited time period.

10.7.5 Fees deferred in accordance with Section 10.5.15 are recognized on a straight-line basis over the period during which the fee grants the cardholder the right to use the card. This accounting treatment also applies to similar arrangements involving the extension of credit by the card issuer.

10.7.6 Certain costs may be incurred by the issuer in connection with issuing a credit card. Only origination costs eligible for deferral as directly related loan origination costs are eligible for deferral under this section. Section 10.5.16 clarifies that only origination costs eligible for deferral are eligible for deferral under the definition of the term. All other costs are expensed as incurred. This definition clarifies that costs likely (likely) to be eligible for deferral are expensed as incurred. Only fees when a credit card is first issued.

10.7.7 The net amount of credit card origination costs netted against the credit card fee is recognized and reduced on a straight-line basis over the eligibility period in accordance with Section 10.5.17, if applicable. Section 10.7.7 determines the significance (significance) of the fee amount relative to the related costs and provides guidance on the matter.

10.7.8 Any net amount deferred in accordance with Section 10.5.18 is reduced on a straight-line basis over the eligibility period.

10.7.9 Loan Restructuring or Refinancing If as a result of loan restructuring or refinancing, the terms of the new loan are more favorable (favorable) than the terms of the bank's comparable loans to other customers with similar collection risks, or at least similar, the restructured or refinanced loan is treated as a new loan by the banking entity. This condition is met if the effective yield rate of the new loan is at least equal to the effective yield rate of such loans. All penalties for repayment and the net costs or net fees not reduced are recognized as income at the time of granting the original loan, taking into account the effective yield rate. The nominal interest rate, commitment fees, origination costs, and directly related loan origination costs are taken into account when comparing.

Reporting Requirements for Banks by the Supervisor: Annual Financial Report 661-15.12

compensating balance) arrangements

If the organization or financing is not renewed, or if only minor changes were made to the loan contract (10.7.9), the original net investment shall include the reduced net fees or costs incurred for the loan, as well as any penalties for early repayment. In this case, the new loan investment shall include all additional loan amounts, the net investment balance of the original loan, all costs directly incurred in creating it, and all fees received, attributed to the renewed organization or financing.

If a change in a debt instrument is considered more than minor in accordance with Section 10.7.10 (10.7.11), the banker shall evaluate whether the difference between the new present value of cash flows in accordance with the new debt instrument terms and the original present value of cash flows in accordance with the original debt instrument terms is at least 10% different. If the difference is less than 10%, the banker shall evaluate whether the change is more minor based on specific facts and circumstances (including other relevant factors related to the change).

Regarding changes in terms related to the restructuring of problematic debt, any fees received and all costs incurred shall be deducted from the recorded loan balance. Direct costs of creating the loan shall be expensed as incurred.

Mortgage Loan Payment Changes

The banker and the borrower may enter into an agreement within the framework of the mortgage payments at the end of a specific period, allowing the borrower to complete (forgive) a portion of the loan principal. If the borrower receives a principal reduction but does not pay less than the beginning of the agreement, the guidelines in Section 10.7.11 shall apply. If the change is considered more minor in accordance with Section 10.7.10, assuming the borrower is expected to continue paying the increased payments, the expense related to the partial forgiveness shall be accumulated over the specified period throughout the period of the increased payments.

A banking corporation may reduce interest rates in general due to a decrease in interest rates. If the change in interest rate does not require additional closure of the loan, the borrower is not obligated to pay a larger part. The 10% test shall be applied for the purpose of calculating the present value of cash flows in accordance with the guidelines in Codification 470.

Reporting Requirements for Banks by the Supervisor: Annual Financial Report 661-15.13

The standard closure costs shall be compared to the effective yield rate. The effective yield rate of the new loan shall be compared to the effective yield rate of other comparable loans offered to customers of the banking corporation. If the yield rate of the new loan is at least as favorable as the effective yield rate of these loans, the guidelines in Section 10.7.11 shall be used to determine whether the change is considered more minor. If not, the reduced net fees and costs of the original loan and any penalties for early repayment shall be included as part of the net investment in the new loan. However, if the change in the interest rate is accounted for as a refinancing in accordance with Section 10.7.18, it shall be treated in accordance with Sections 10.7.9 to 10.7.10.

Acquisition of Loans or Groups of Loans

Section 10.6.5 clarifies that the initial investment in an acquired loan or group of loans includes the amount paid to the seller plus all fees, net of any fees received, as clarified in Section 10.5.22. This difference shall be recognized as an adjustment to the yield over the life of the loan, as the initial investment in the loan is close to the loan principal amount at the time of the loan.

Section 10.6.5 clarifies that in applying the conditions of this section for acquired loans, the purchaser may allocate the initial investment to the acquired loans as a group, or may account for the initial investment separately for each loan, provided that the cash flows specified in the underlying loan contracts are aggregated. If the effective interest method is not applied in accordance with Section 10.7.26, or if prepayments are not expected to occur, despite prepayments occurring, the proportional amount of the fees related to the purchase discount or premium and deferred fees or costs shall be recognized in the profit or loss upon sale, so that the effective interest rate of the remaining loans does not change.

Other Interest and Amortization Methods

Deferred net costs or net fees shall not be amortized during periods in which interest income is not recognized from loans due to concerns regarding the realization of the loan principal or interest thereon.

Deferred net costs or net fees shall be recognized as adjustments to the yield over the life of the loan, except as stated in the aforementioned sections, in accordance with the interest method, for the purpose of recording interest income. Sections 10.7.21 to 10.7.24 include periodic interest (including fees and costs) at the effective yield rate.

Reporting Requirements for Banks by the Supervisor: Annual Financial Report 661-15.14

The debt balance on the net investment in the loan (receivable) shall be fixed, adjusted by fees, by deferred net costs, or by purchase discount or premium. The periodic amortization amount is the difference between the stated periodic interest income and the set periodic interest rate. Section 4 applies to this section.

When the stated interest rate is variable, the interest method shall be applied as follows throughout the loan period:

a. If the stated interest rate on the loan increases during the loan period, the interest accrued in accordance with the interest method shall be such that the interest amount accrued (in accordance with the stated interest rate) does not exceed the amount that can be settled by the borrower, taking into account the amount that can be settled by the borrower in determining early repayment penalties. Only the penalties that can be imposed on the loan in accordance with the loan terms shall be taken into account in determining the amount that can be settled by the borrower. (See guidelines in Codification 310-20-55). A limit is imposed on the periodic amortization amount that can be recognized, but this limit does not apply to costs directly incurred (costs incurred in creating the investment such as purchase premiums and loan creation costs). The limit is a contingent right to receive interest income through the accumulation of interest income, contingent only on the loan net investment being greater than the costs incurred.

b. If the stated interest rate on the loan decreases during the loan period, the periodic interest amount received at the beginning of the loan period in accordance with the loan period shall be calculated in accordance with the periodic interest income. The excess shall be deferred and recognized in future periods, in accordance with the interest method, at the fixed effective yield rate calculated in accordance with the stated interest rate. (See guidelines in Codification 310-20-55).

c. If the stated interest rate on the loan is variable based on changes, the fixed effective yield rate required for the recognition of fees and costs shall be based on the factor or index (such as LIBOR - London Interbank Offered Rate, Prime Rate) applicable at the inception (day of grant) of the loan.

4. See guidelines regarding the interest method in paragraphs 35-20-55 to 35-835-30-35-2 in Codification.

Reporting Requirements for Banks by the Supervisor: Annual Financial Report 661-15.15

(See guidelines in Codification 310-20-55 regarding the application of the loan as variable based on the factor or loan interest rate. Also subject to the conditions in paragraphs (a) and (b) of its initial interest rate based on the variable factor).

When determining the stated interest rate of a variable interest rate loan in accordance with Section 10.7.19, the banking corporation shall calculate the fixed effective yield based on the use of future changes dependent on the factor or factor that is variable throughout the life of the loan, in accordance with the guidelines. The banking corporation shall not pass to the alternative specified in paragraph (c) of Section 10.7.18. The banker must choose one of the two alternatives and apply the method consistently throughout the life of the loan.

In the period of a variable interest rate loan dependent on a factor, the fixed effective yield shall not be recalculated from the date of the change, but from the date of the loan. See Example 9 to illustrate the guidelines for application. (Paragraph 310-20-55-43 in Codification).

Agreements for Loans that do not specify repayment schedules (10.7.21): Other agreements granting the borrower the option to take a number of payments up to a maximum amount of loans, parts of loans prior to (revolving lines of credit); contracts under which the borrower can renew. (lines of credit).

If the banking corporation requires that fees or net costs be paid for the loan (10.7.22), they shall be recognized as adjustments to the yield over the period on a straight-line basis, consistent with the following:

a. Understandings between the banking corporation and the borrower. b. If there are no existing understandings, the banking corporation shall estimate the period during which the loan will remain outstanding; when the loan is fully paid, the unamortized amount shall be recognized.

The banking corporation shall monitor these estimates regularly and update them. If, contrary to expectations, a loan has not been paid off after the period, no adjustment is required to the expected repayment date.

For revolving lines of credit or similar loan arrangements (10.7.23), net costs or net fees shall be recognized in the profit or loss over the period of the active revolving line of credit, assuming loans are available. If the borrower pays off all loans in accordance with the maximum set in the loan contract and cannot renew his loans, the unamortized net costs or net fees shall be recognized in the profit or loss at the time of repayment.

Reporting Requirements for Banks by the Supervisor: Annual Financial Report 661-15.16

The interest method shall be applied to recognize net fees or net costs when the loan agreement does not specify a repayment schedule and no additional loans have been given.

For example, if the loan agreement grants the borrower the option to convert to a line of credit, and the banking corporation recognizes net costs or net fees over the period of the revolving line of credit on a straight-line basis in the profit or loss over the remaining life of the fixed-term loan and the revolving line of credit combined, if the borrower chooses to convert the line of credit to a fixed-term loan, the banking corporation shall recognize net costs or net fees using the interest method. If the revolving line of credit expires and the loans are settled, the unamortized net costs or net fees shall be recognized in the profit or loss at the time of repayment.

If the borrower still has a contractual right to borrow under the revolving line of credit (10.7.25), the net fees and net costs attributed to the revolving line of credit shall be amortized. If the period of the line of credit is not used, or if a specific period is not used, the unamortized net costs or net fees shall be recognized in the profit or loss at the time of repayment.

Estimating Principal Prepayments (10.7.26): Except as stated in the following sentence, the calculation of the fixed effective yield shall be based on the required payment terms for the application of the interest method, and an estimate of principal prepayments shall not be made to shorten the loan period, unless the banking corporation holds a large number of similar loans for which prepayments are expected and the amount and timing of prepayments can be reasonably estimated. The banking corporation may take into account prepayment estimates in calculating the fixed effective yield for the application of the interest method. If the banking corporation makes an estimate of prepayments for the application of the interest method and a difference arises between the estimate of prepayments and the actual prepayments, the banking corporation shall recalculate the effective yield to reflect the payments actually received up to the time of the calculation, and adjust the net investment in loans to the amount that would have been recorded if the new effective yield had been applied from the date of acquisition, either by debit or credit to the loan balance. Interest income shall be credited.

Reporting Requirements for Banks by the Supervisor: Annual Financial Report 661-15.17

Loans with similar characteristics should be grouped together (10.7.27). It shall be possible to predict past prepayments such that the loans will be similar in a variety of interest rate environments. Loans shall be grouped together for application if the amounts of net fees or net costs are sufficiently similar. In the case of an individual loan, it shall be practical to recalculate the balance sheet balance of this loan.

A banking corporation may, in accordance with Section 10.7.28, use one method for various loans or choose different methods for loans, based on the characteristics of the loans. For example, homogeneous mortgage loans can be grouped, but when the banker chooses, the appropriate accounting method for the accounting treatment of the loan group or loan life must be used. The banking corporation must continue to use the same method over the life of the loans.

If the accounting treatment is for each loan separately (10.7.29), the contract life shall be adjusted on the basis of actual prepayments for net fees or net costs.

The banking corporation shall take into account several characteristics in determining (10.7.30). The purpose is to evaluate all characteristics that will affect the ability of the banking corporation to estimate the behavior of a group of loans. Examples of certain characteristics to take into account when grouping loans include:

a. Loan type. b. Loan size. c. Nature and location of collateral. d. Coupon interest rate. e. Repayment date. f. Creation period. g. Historical prepayment history of the loans (if any). h. Level of net fees or costs. i. Penalties for prepayment. j. Type of interest rate (variable or fixed).

Reporting Requirements for Banks by the Supervisor: Annual Financial Report 661-15.18

Expected prepayments in a variety of interest rate scenarios.

If the banking corporation meets the requirements of Section 10.7.31, it shall take into account prepayments in calculating the fixed effective yield. It shall take into account several factors in estimating prepayments. The banking corporation shall take into account historical data in estimating prepayments. In addition, the banking corporation shall take into account external information, including published mortality tables, economic conditions, and existing and projected interest rates. If changes occur in the estimates of prepayments during the period, or if actual prepayments differ from the estimated prepayments, an adjustment is required.

If the banking corporation loses the ability to group loans in a general way after recognizing part of the loans (10.7.32), the unique distinction of the loans shall be calculated. The profit or loss on the sold or paid-off loans shall be appropriate based on the ratio of net fees or net costs to the loan balances. If the banking corporation has sufficient recorded accounting information to perform specific identification of the profit or loss, the grouped loans shall be identified.

Assuming a banking corporation is a purchaser of a bond with a premium redeemable at a price lower than the earliest possible date (10.7.33), the amortization period of the premium shall not be earlier than the date the issuer can prepay the loan in accordance with Section 10.7.26. The banking corporation shall take into account the possibility of holding a large number of similar loans in estimating prepayments for the application of the interest method.

Transactions Related to Loan Origination Other Than Loans (10.7.34): A banking corporation may receive fees for transactions related to loan origination other than loans. For example, the borrower may pay a fee to the banker for extending the contractual repayment date of an existing loan, for converting a fixed-rate mortgage to a variable interest rate, or for taking out a new loan by a new borrower. In each of these situations, the banking corporation gave the loan itself to the borrower or the original borrower waived it. Therefore, all fees received shall be recognized as adjustments to the yield over the life of the loan.

Blended Rate Loans (10.7.35): A loan bearing a variety of interest rates is a loan where the interest rate is subject to the resulting difference between the existing loan and the market rate. This arrangement is not considered a refinancing like any other new loan, but it does not meet the yield criteria specified in Section 10.7.9. Therefore, net fees and net costs incurred for the refinancing, as well as net fees and net costs related to the existing loan, shall be transferred to the new loan as a blended rate, since the new loan is offered at a market rate lower than loans with similar collection risks to other customers of the banking corporation.

310-20-40.10.8

Allocation of Fees

Except in cases specified in Sections 10.7.3(a)-(b), for fees received for loan origination commitments, acquisition of loans or groups of loans, or commitments, the fees shall be recognized in the profit or loss upon expiration of the commitment, without being realized.

310-20-45.10.9

Balance Sheet Classification

Unamortized fees for loan origination (10.9.1) shall be reported by the banking corporation in the balance sheet as an adjustment to the yield of credit commitments, fees, and other costs, including purchase discounts and premiums, related to the loan balance.

Credit allocation fees meeting the criteria of Section 10.7.3 shall be classified as deferred income in the financial statements (10.9.2).

Profit or Loss Classification

Amounts of fees for loan origination, credit allocation fees, and other fees and costs (10.9.3) recognized as adjustments to the yield shall be reported as part of interest income. Other fees, such as unamortized credit allocation fees, shall be reported as fee income upon expiration of the commitment or over the period of the commitment included in income. See 310-20-50.10.10.

Disclosure of Net Fees and Costs

This section requires the main accounting policy explanation to include the interest method (10.10.1), including the banking corporation's policy on the treatment of related fees and costs, including net deferred costs or net deferred fees. Banking corporations using estimates of prepayments for the application of the interest method shall disclose the significance of this policy and the estimates of prepayments on which it is based (10.10.2). Unamortized net fees and net costs shall be reported as part of any loan group (10.10.3). Separate disclosure may be given in the notes to the financial statements if the banking corporation believes this information is useful to users of the financial statements. Regarding credit card fees and costs (10.10.4), the banking corporation shall disclose the unamortized net amount as of the balance sheet date, the accounting policy, and the amortization periods, for credit cards issued and acquired.

Adaptation.11

a. Assets (excluding securities for value) and liabilities linked to foreign currency shall be included in the balance sheet other than at the exchange rate on the balance sheet date, unless otherwise determined by the terms of the linked agreement. They shall be included in accordance with the agreement terms, to a lower index or consumer price index.

b. A lower interest rate shall be included between the interest rate given to the receiver and the higher of the two.

c. Cancelled.

Reporting Requirements for Banks by the Supervisor: Annual Financial Report 661-20.11.1

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The adjustment is a significant unobservable input and the adjustment is at Level 2.

3. Cancelled.

Level 1 Data

Level 1 data are adjusted quoted prices for assets or liabilities in active markets (40).

The reporting banking corporation has access to identical assets or liabilities at the time of measurement.

A quoted price in an active market is the most reliable evidence of fair value (41).

Except as specified in Section 41.H.19, adjustments to fair value measurement are available at all times.

a. Cancelled.

b. Level 1 data will be available for many financial assets and liabilities. Therefore, emphasis is placed on trading in multiple active markets (e.g., different exchanges). The following two factors determine Level 1:

a. The primary market of the asset or liability – or, in the absence of a primary market, the most useful market of the asset or liability.

b. Whether the reporting banking corporation can enter into a transaction for the asset or liability at the market price at the time of measurement.

A reporting banking corporation shall not apply Level 1 data in the following circumstances (41c):

a. When the reporting banking corporation holds a large number of similar liabilities or assets (e.g., bonds) that are similar but not identical, and although a quoted price is available in an active market for one of the assets, it will be difficult for the reporting banking corporation to obtain information on pricing for each separate liability or asset held, given the large number of similar assets and liabilities. In this case.

b. A reporting banking corporation may use alternative pricing methods for practical reasons (e.g., not relying exclusively on quoted prices). With the use of alternative pricing methods, the fair value shall be classified at a lower level.

c. When a quoted price in an active market does not represent fair value at the time of measurement, for example, if significant events occur between market transactions (e.g., primary-to-primary trading, announcements, or intermediated trading) after the market close before the measurement date. The reporting banking corporation shall determine whether these events affect fair value measurements. With consistent policy to identify these events, if the adjusted quoted price provides new information, the fair value measurement shall be classified at a lower level.

d. When measuring the fair value of a liability or equity instrument classified in owners' equity, the reporting banking corporation shall use the quoted price for the shares of the entity for which the item is specific, and this price should be adjusted for factors specific to the item.

• A banking corporation may continue to measure fair value of assets and liabilities measured at fair value in the balance sheet using the exchange rate. The exchange rate shall be considered Level 1 data.

Reporting Requirements for Banks by the Supervisor: Annual Financial Report 664-3

664-5 - Next Page

(56) (and to the public) from credit income.

a. These sections shall include interest income, including differences in indexation to the price index, differences in interest rate to the consumer price index, and differences in interest rate to the credit.

b. These sections shall include fees in accordance with Section 10.A10. "Interest income" shall include them and treat them as adjustments to the yield of the credit.

c. See Section 30 – Interest on impaired debt.

Reporting Requirements for Banks by the Supervisor: Annual Financial Report 664-10

664-11 - Next Page

d. The amount of credit losses charged to the profit or loss shall be presented in the notes as specified. (See also Sections 29-30(b) – on public credit).

Fees.67 (99/10, 97/4)

a. This section shall include fees for providing services, provided that in the notes, except for fees recognized as adjustments to the yield and included in interest income in accordance with Reporting Requirements 10.A.

b. Fees on securities transactions from customers shall be presented net of fees paid to the stock exchange for securities.

c. Banks shall include all fees related to "credit handling" for mortgages, including eligibility for certificates, etc.

d. Explanations regarding the classification of fees collected from customers shall be included in Appendix B.

e. This section shall include these revenues as net income from credit portfolios. Income from collection fees and fees collected during the period of activity shall be included, subject to separate disclosure in the notes in accordance with Section 10.A15, if presented net, subject to the materiality of collection fees from other credit portfolio management and treasury collection fees.

f. This section shall include fees for the distribution of financial products, such as trust funds (e.g., 4 part – trust fund participation unit fee for pension funds, provident funds, including life and non-life insurance premiums and products). This section shall also include distribution fees received by a banking corporation as a result of distributing similar financial products.

Insurance and management fees collected for insurance companies shall not be included as insurance and management fees, but shall be transferred to them.

g. This section shall include revenues from services such as institutional and trust operations, management of pension funds, provident funds, and trust funds.

h. This section shall include fees for credits, guarantees, acceptances, etc., and certificates, etc., which shall be allocated proportionally over the periods of the transactions.

i. Other fees – other fees not related to the activity shall be specified separately in the notes. For example, other fees arising from the field. If not presented separately in the notes, it is an immaterial activity.

Reporting Requirements for Banks by the Supervisor: Annual Financial Report 669-92

Appendix 'Z' - Fees - Note 22

Notes and parts of the full fee schedule in the notes:

1. Account management fees, except for conversion fees (Parts 1, 2, 5).
2. Credit cards (Parts 6, 12).
3. Securities activities (derivatives and instruments) - certain.
4. Except for trust fund distribution fees and 4 part – trust fund participation.
5. Credit handling (Part 3).
6. Conversion fees – conversion fees – income from exchange rate differences – conversion performed by the banking corporation for the customer.
7. Foreign trade activities.
8. Financing business fees (Part 7).
9. Financing business fees – credits, guarantees, acceptances, etc., certificates, etc.

Parts 8, 9, 10, 11 and others

Notes:

1. Small businesses that are not fee-based businesses shall be classified together under Sections 1 to 8 (above).
2. "Fees" shall not be included in the fees section according to the nature of the item. For example, if interest income is included in the tariff, it shall be treated as "Income from Credit" according to Section 10A.

(2/14) [1] Directions for Public Reporting: The Supervisor of Banks 673-1 'Am (Transition Directions for 2013)

Transition Directions for 2013

The Board of Directors' report, management review, declaration regarding disclosure, and the annual report of banking institutions and credit card companies (A"HCH) regarding which the following were determined, are recommended to implement this format with the specificity of the transition directions. These directions apply to quarterly reports of institutions from the year 2014 onwards.

It is clarified that the following transition directions apply to the changes required for quarterly reports. The transition directions included within the framework of the transition directions for 2014 apply to periods starting from the year 2014 onwards. (Pages 674-1-20 (2014)

Board of Directors' Report

Implementation of disclosure requirements in reports of banking institutions and credit card companies - Time Direction (Pages 694A-1-39 (Basel Pillar 3

1. The Board of Directors' report as of 31.12.2013 shall include quantitative and qualitative reference to the main factors and the quality of capital and reserves due to the adoption of Basel III rules, which are expected to apply due to changes in risk-weighted assets.

2. Additional transition directions included within the framework of the transition directions for 2014 apply to relevant periods starting from the year 2014 onwards. (Pages 674-1-20 (2014)

3. Disclosure of data in the Board of Directors' report When data is required to be disclosed in the Board of Directors' report, transition directions regarding the disclosure of such data also apply to the management review or financial reports.

4. Time Direction regarding the business description of the banking institution and forward-looking information in the Board of Directors' report (Pages 696-1-15

In any case where the Supervisor of Banks requires prior guidance, the institution shall not be required to provide additional disclosure in the public report for the purpose of the customer, unless required by Section 13(b).

5. A banking institution shall not be required to provide disclosure required under Section 26(d)(2) of the Addendum to the Time Direction.

6. Time Direction regarding the approval process of financial reports of a banking institution (Pages 697A-1-4

A banking institution shall not be required to provide disclosure for the year 2013 in its quarterly reports and annual reports for 2014, unless the disclosure is required by the guidance on disclosure for the year 2013 in its periodic report, regarding the questionnaire of corporate governance dated 12.9.12 of the Securities Authority.

Management Review

Exposure to changes in interest rates

7. A banking institution is not required to classify a financial instrument as a complex financial instrument if it is able to reflect its interest rate exposure through disclosure of the remaining maturity periods of the cash flows in a reasonable manner. For example, a banking institution is not required to classify a financial instrument as a complex financial instrument if it has components that are not separable.

(2/14) [1] Directions for Public Reporting: The Supervisor of Banks 673-2 'Am (Transition Directions for 2013)

If the institution is required to separate embedded options that are not essential to the public reporting directions under Part 1A, it may separate them to reasonably reflect its interest rate exposure. For this purpose, the bank shall treat the option component of these instruments as if they were standalone instruments, and provide separate disclosure. If the treatment of these instruments as mentioned above had a material effect on the fair value, it shall be disclosed on the "Effective Interest Rate" segment in all.

Board of Directors' Report, Declaration Regarding Disclosure

Implementation of Directive 305 regarding internal control and financial reporting

8. When the Supervisor of Banks has determined specific transition directions for a banking institution regarding the implementation of Directive 305, the institution shall refer to the guidance received from the Supervisor of Banks regarding "Standard Banking Management - Chief Accountant" and the required signature on the declaration regarding internal control and financial reporting.

Financial Reports

Implementation of disclosure requirements in reports of banking institutions and credit card companies - Time Direction (Pages 694A-1-39 (Basel Pillar 3

9. According to the directions of the Supervisor of Banks, the explanatory note on capital adequacy in the financial report as of 31.12.2013 shall include controlled disclosure regarding the expected impact of the adoption of Basel III rules. The following data shall be calculated in accordance with Basel III rules as of 1.1.2014:
10. Tier 1 capital (after regulatory adjustments and deductions);
11. Total capital (including Tier 1 capital) (after regulatory adjustments and deductions);
12. Total risk-weighted assets;
13. Tier 1 capital ratio to risk-weighted assets;
14. Total capital ratio to risk-weighted assets;
15. Tier 1 capital ratio required by the Supervisor of Banks;
16. Total capital ratio required by the Supervisor of Banks.

The data shall be presented after the impact of the transition directions determined by the Supervisor of Banks.

10. Additional transition directions included within the framework of the transition directions for 2014 apply to relevant periods starting from the year 2014 onwards. (Pages 674-1-20 (2014)

Update of disclosure on credit quality and provisions for credit losses

11. A banking institution shall provide public report disclosure for the year 2012 onwards, including balance sheet data, for the first time. It is clarified that this direction requires the disclosure required under Section 30.A.G.8 for the year 2012. Disclosure shall be provided from the public report as of 31.3.2013 onwards, in accordance with Section 12.B.G.30 and Section 13.B.G.30.

(2/14) [1] Directions for Public Reporting: The Supervisor of Banks 673-3 'Am (Transition Directions for 2013)

12. Despite the above, the requirement for separate disclosure of 'Credit Risk Rating Performance' in the Addendum shall apply only from the report for the year 2014 onwards. Early implementation is recommended for non-banking institutions providing credit risk disclosure. The format of disclosure shall be more suitable for early credit rating performance reports.

13. A banking institution is required to provide comparative number disclosure in accordance with the format of the public reporting directions, except for the following exceptions: a. A banking institution is not required to provide comparative number disclosure regarding "Problem Debts" in the notes. "Problem Debts" were not provided in the financial report for the year 2012 due to the transition directions. b. A banking institution is permitted to provide comparative number disclosure in the notes regarding additional information on "Problem Debts" presented in the format of "Average Balance - Impaired Debts" in accordance with the directions for the transition year 2012.

Disclosure on Deposits

14. A banking institution shall apply this direction retroactively from the public report for the year 2013 onwards, except for the requirement. Disclosure shall be made on the balance of deposits included in institutional bodies where deposits were raised in Israel. A banking institution shall not be required to provide comparative number disclosure for the end of each quarter of 2012 regarding the balance of deposits of institutional bodies, from the public report as of 31.3.2013 onwards.

Impairment of Assets

15. When a banking institution recognized an impairment loss on a specific asset before 1.7.07, it is appropriate to continue classifying it under "Profit and Loss - Gains and Losses on Discontinued Operations" and to update the provision for the specific asset in the same section of the profit and loss statement.

Section 19 of the Public Reporting Directions - Fair Value Measurement

Counterparty Credit Risk in the Calculation of Fair Value of Derivatives

16. The data to be used in the calculation of the fair value of derivatives shall be provided by a banking institution in its quarterly and annual financial reports for 2012 and 2013. A banking institution is permitted to make adjustments regarding counterparty credit risk for derivatives as follows: a. When liquid collateral exists that provides specific certainty, the institution is required to make adjustments for the quality of the counterparty credit of the derivative instrument. b. When the exposure to the counterparty is not significantly unified, the banking institution is required to make reasonable efforts to find indications of market transactions for the active side of the credit quality, such as deriving indications from transactions with similar counterparties (excluding the derivative counterparty) and prices of debt instruments traded in the active market.

(2/14) [1] Directions for Public Reporting: The Supervisor of Banks 673-4 'Am (Transition Directions for 2013)

To the extent that such indications do not exist, the banking institution may calculate the adjustments based on internal ratings (such as expected default rates, credit loss rates). c. Regarding other counterparties, the banking institution may calculate the "H" adjustment based on a unified basis, for example, using a credit quality index for groups of similar counterparties, based on internal ratings. d. The banking institution is required to check the reasonableness of the results obtained according to this section and, if necessary, make adjustments based on market spreads. e. For this purpose, an exposure exceeding 1% of the banking institution's Tier 1 capital shall be considered a significant exposure.

This transition direction is not effective for the quarterly reports for the year 2014 onwards, for the sake of clarity.

17. The models to be used in the calculation of the fair value of derivatives shall be provided by a banking institution in its quarterly and annual financial reports for 2012 and 2013. A banking institution is not required to use complex models including various scenarios of potential exposure to measure the credit risk component included in the fair value of derivatives.

This transition direction is not effective for the quarterly reports for the year 2014 onwards, for the sake of clarity.

International Financial Reporting Standards (IFRS) - Certain Topics

IAS 28 - Accounting Policy in Investment Companies

18. Despite the provisions of IAS 28 regarding "Investment Companies," a banking institution is not permitted, for practical reasons, to perform accounting policy alignments for the years 2011, 2012, and 2013. In order for the accounting policy of the included company to be consistent with the banking institution regarding the topics of the core banking business, the banking institution shall provide disclosure according to this section.

It is clarified: 19. This section applies only to an included company whose financial statements are prepared in accordance with IFRS. d. Topics in the core banking business - Public reporting directions have not yet been adopted.

Adoption of US GAAP and Format of Profit and Loss Statement for Banking Institutions - Measurement of Interest Income

20. The directions determined in the circular regarding the adoption of US GAAP and the format of the profit and loss statement for banking institutions, related to the measurement of interest income, shall apply retroactively from the first quarter of 2012 onwards. The amendments related to the adoption of US GAAP regarding the measurement of interest income shall be applied from 1.1.2014 onwards, for transactions created or modified from that date onwards.

A banking institution shall provide disclosure in its quarterly and annual financial reports for 2014 regarding the impact of the implementation of this section on net interest income and non-interest income from interest.

a. Prepayment fees on loans created before 1.1.2014 shall continue to be treated as accounting items until 31.12.2013, in accordance with the public reporting directions. b. A banking institution is not required to determine whether a loan modification constitutes a restructuring of debt. A modification is considered minor if it does not meet the quantitative test specified in Section 10.7.11 of the public reporting directions regarding problematic loans. A banking institution may determine, in accordance with the public reporting directions, that a change in the currency of a loan is not a minor change. b. For other loans, a banking institution may use reasonable estimates to meet the quantitative test. The accounting shall be prudent, ensuring that the calculation involves accurate calculation of present value. The banking institution shall maintain documentation showing that this accounting treatment meets all material aspects of the directions in Section 10A. If it is possible to use reasonable estimates to determine that the change is minor, as mentioned above. c. A banking institution is not required to treat fees for credit allocation as required in Section 10.7.3 of the public reporting directions. A banking institution may treat fees as follows: a. Assume that the probability of fulfilling the commitment to extend credit is remote. b. Recognize a relative portion of the credit allocation fee at each credit utilization date, based on a straight-line basis over the period, calculated as the relative portion of the utilized credit facility from the total credit facility, plus a reasonable additional amount to ensure prudent treatment similar to loan repayments. c. Regardless of whether the credit facility has expired, if the commitment to extend credit has not expired, recognize the fee for the portion of the utilized credit facility in the profit and loss statement at the time the commitment expires and the loss occurs.

Implementation of the Direction Regarding Measurement, Disclosure of Problem Debts, and Provisions for Credit Risk

21. A banking institution is required to cancel, from 1.1.12 onwards, the accumulation of currency exchange differences on the fund for credit losses. This applies only to debts classified as impaired from 1.1.12 onwards, for which payment has not yet been made.

Transfers of Financial Assets and Services and Settlement of Liabilities

Deferred Rights Retained in a Securitization Transaction (See Section 6.2.2 of "Chaimovitz Committee - Credit")

22. When a banking institution implements these directions and transferred financial assets in a securitization transaction recorded as a sale, it shall treat the deferred rights retained in the transfer as follows after initial recognition:
23. The carrying amount of the deferred rights shall be amortized using the straight-line method over a period not exceeding 36 months from the date of creation (1/36 deducted at the end of the first month, 1/35 deducted at the end of the second month, etc., from the balance).
24. At each reporting date, there is a need to examine the impairment of the deferred rights.
25. If a significant portion of the deferred rights retained is sold to non-affiliated parties after the securitization, the remaining deferred rights shall be measured in accordance with the relevant sections of the public reporting directions.

Off-Balance Sheet Credit and Risk to Public Credit According to the Size of the Borrower's Credit

23. A banking institution may include the balance of "Derivatives Assets for Borrowers" in the column "Balance Sheet Credit Risk" and provide disclosure on the total balances referred to as "Credit for Borrowers" in the notes to "B.4" of the public report.

Contingent Claims

24. Regarding contingent claims with a remote possibility of realization, as stated in Section 47.B.4(1)(b) (Page 663-11.1), a banking institution is permitted, in accordance with the public reporting directions, to present the additional exposure amount in one of the amounts.

Assets and Liabilities Based on Basic Indexation and Maturity

25. A banking institution is not required to present future cash flows for assets and liabilities bearing variable interest rates based on the expected change in the variable interest rate index according to conventional market yields. A banking institution may present the cash flows in accordance with the international public reporting directions (Section 51.B.5, Page 663-16), assuming no change in the variable interest rate base at the known time of the public reporting.

26. Instead, a banking institution is required to present cash flows for assets based on the distinction between foreign currency and the consumer price index or basic currency for indexation. This direction applies to the distinction between foreign currency and Israeli currency (including Israeli currency linked to foreign currency) and liabilities. This direction shall be applied from the reports for the year 2013 onwards, within the reclassification of comparative numbers for previous years.

27. Disclosure on cash flows for net settled derivative instruments in accordance with Section 22.D.2(1) shall vary as follows: According to the public reporting directions, the expected contractual balance sheet cash flow for the instrument shall be reported. There is no need to report if the derivative is classified as Israeli currency or foreign currency according to the currency in which settlement will be carried out. This direction shall be applied from the reports for the year 2013 onwards, within the reclassification of comparative numbers for previous years, regarding balance sheet foreign currency amounts of derivative instruments.

1 EITF 99-20 "recognition of interest income and impairment on purchased and retained beneficial - interest interests in securitized financial assets"

(2/14) [1] Directions for Public Reporting: The Supervisor of Banks 673-7 'Am (Transition Directions for 2013)

Summary of Reports on the Banking Group Structure

28. A banking institution shall not present the explanatory note on the summary of financial reports on the banking group structure (Section 79.B7, Pages 664-29 and 669-67, A29) required by the public reporting directions.

Implementation of Directive 305 "Standard Banking Management - Chief Accountant"

29. When the Supervisor of Banks has determined specific transition directions for a banking institution regarding the implementation of Directive 305, the institution shall refer to the guidance received from the Supervisor of Banks regarding "Standard Banking Management - Chief Accountant" and the signature on this report.

Integration of Supervisory Letters into Public Reporting Directions

30. The public reporting directions shall be updated to integrate the public reporting directions resulting from the supervisory letters brought in Circular 2388-06, effective from 31.12.2013 onwards. When a banking institution is required to reclassify comparative numbers, it shall adapt to the new disclosure format if relevant.

Reporting on Amounts Reclassified to Other Comprehensive Income

31. A banking institution is required to apply retroactively from the public report for the first quarter of 2014 onwards the directions regarding amounts reclassified to other comprehensive income.

Advancement of Publication Dates for Public Reports

32. The publication of annual reports by a banking institution at the head of a banking group for the year 2013 shall be published by 20.3.2014, and the public report for the year 2014 shall be published by 10.3.2015. The balance sheet shall not be published later than two months from the date. From the year 2015 onwards.

33. Publication of Quarterly Reports - Quarterly reports of banking institutions and credit card companies for the year 2014 shall be published no later than 55 days from the balance sheet date. From the year 2016 onwards, quarterly reports shall be published no later than 50 days from the balance sheet date, and no later than 45 days from the balance sheet date.

Reclassification of Comparative Data Included in Amendments to This Circular

34. A banking institution that has difficulty sorting comparative data in accordance with these transition directions may refer to the Manager, and the financial reporting unit under the supervision of the Supervisor of Banks shall consider specific guidance for that banking institution according to the matter.

Annual Report of A"HCH

35. The transition directions specified in Part A above shall also apply to A"HCH, as far as the questions are relevant to their reports, both annual and quarterly.

(2/14) [1] Directions for Public Reporting: The Supervisor of Banks 673-8 'Am (Transition Directions for 2013)

Management Review

36. A"HCH may present in the management review 'Income and Expense Rates' of a credit card company, based on the average balance in the foreign currency segment linked to the Israeli currency, for its affiliated companies from the beginning of the months.

37. A"HCH shall not be required to provide disclosure on exposure to foreign countries if there is no significant exposure to foreign countries.

Financial Reports

38. A"HCH may present in the cash flow statement the movement of deposits in banks, on a net basis, with respect to credit card holders and credit.

39. A"HCH shall not provide disclosure on "Inventory and Movement Points" - Stars / Points and Movement, as specified in the note "Entitled to 'Credit in Card Activity'."

40. The changes mentioned above apply to quarterly reports of A"HCH published from the year 2014 onwards.

Reclassification of Comparative Data Included in Amendments to This Circular

41. A"HCH that has difficulty sorting comparative data in accordance with these transition directions may refer to the Manager, and the financial reporting unit under the supervision of the Supervisor of Banks shall consider specific guidance for that company according to the matter.

(2/14) [2] Directions for Public Reporting: The Supervisor of Banks 674-1 'Am (Transition Directions for 2014)

Transition Directions for 2014

Annual Report of a Banking Institution and A"HCH

Implementation of disclosure requirements in reports of banking institutions and credit card companies - Time Direction

1. A banking institution (A"HCH banking institution, Page 694A-6) is required to provide disclosure regarding the disclosure on capital, from 1.1.2014 onwards: 1.1. The main characteristics of regulatory capital instruments issued (Section 694A-6 'Am (a)). 1.2. The composition of regulatory capital (Section 694A-6 'Am (d)).

2. A banking institution shall provide disclosure on the main characteristics of capital instruments for the periods 2014-2018. The disclosure shall be provided in the frequency and location determined by the Time Direction, instead of the format determined by the transition directions, regarding the composition of regulatory capital and issued regulatory capital instruments, as follows: 2.1. The main characteristics of issued regulatory capital instruments, including existing capital instruments, shall be disclosed in accordance with the table presented in Appendix 'A', with gradual reduction during the transition periods. Disclosure shall be provided for the first time as of 1.1.14 at the time of publication of the financial reports as of 31.12.2013. Thereafter, the disclosure shall be updated in accordance with the directions determined by the Time Direction. 2.2. The composition of regulatory capital, including capital instruments, reserves, and regulatory adjustments and deductions, shall not be disclosed in accordance with the table presented in Appendix 'B' during the transition period. It is clarified that there is no need to provide disclosure for comparative numbers for periods in the year 2013.

Financial Reports of a Banking Institution and A"HCH

Capital Adequacy According to the Directions of the Supervisor of Banks

3. In the annual financial reports, the explanatory note on capital adequacy according to the directions of the Supervisor of Banks shall include, in addition to the comparative numbers for previous periods prepared in accordance with Basel II rules, a reference to the impact on the capital ratio prepared in accordance with Basel III rules, as adopted by the Supervisor of Banks, regarding the transition arising from Basel III rules.

4. A banking institution shall provide disclosure on the impact of the transition directions in quarterly and annual reports for the years 2014-2022, regarding "Capital Adequacy Measurement - Regulatory Capital - Tier 1" in Directive 202 of Banking Management.

5. Accordingly: 5.1. Disclosure for quarterly reports for the year 2014 shall be presented in the format of Appendix 'C'. 5.2. Disclosure for annual reports from the year 2014 until 2022 shall be presented in the format of Appendix 'D' (and quarterly).

(2/14) [19] Page Time Directions

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Content of Time Directions and Various

Time Directions

Page Description

Discount rate for calculating provisions for employee benefits

690-7

Credit Card Company

691A-1

Board of Directors' Report of a Banking Institution Submitted to the General Assembly of Owners

Credit Card - Shares

692-3

Qualitative Reporting on Exposure to Market Risks and Their Management

694-1

Annual Financial Report of a Banking Institution on a Consolidated Basis with Summaries of Reports

(Only Consolidated) Explanatory Notes to Financial Reports

694-4

Implementation of Reports of Banking Institutions and Credit Card Companies for the Year 2009

Disclosure Requirements According to Basel III Pillar 3 and Onwards

694A-1

694B-1 FSF - Disclosure Requirements Based on Report

Business Description of the Banking Institution and Forward-Looking Information in the Board of Directors' Report

696-1

Disclosure on Internal Auditor in the Board of Directors' Report of a Banking Institution

697-1

Disclosure on the Approval Process of Financial Reports in the Board of Directors' Report

697A-1

Details of Donations by the Banking Institution

698-1

Disclosure on Critical Accounting Policies

698-2

Various

Reporting in Millions of Shekels

695-1

Time Direction for Collective Provision for Credit Losses for the Years 2011-2012

698A-1

Disclosure on Credit Risk in Quarterly Report

698C-1

Key Updates

699-1

(2/14) [5] Directions for Public Reporting: The Supervisor of Banks

Implementation of Disclosure Requirements of Basel III Pillar 3 - Time Directions 694A –3 'Am

10. Quantitative data related to the balance sheet sections shall be provided as of the end of the reporting period, unless otherwise specified. Quantitative data related to the profit and loss statement sections shall be provided for the reporting period in accordance with the direction.

Quantitative data for the profit and loss statement sections shall be provided for the periods specified in the section, in the quarterly report.

In accordance with the public reporting directions, Page 680-4. B.A7

11. Regarding any quantitative data provided as a result of the disclosure requirements of this time direction, comparative data for the corresponding periods in the previous reporting year shall be presented, unless otherwise specified.

12. The disclosure requirements of this time direction shall apply on a consolidated basis.

Part 4 of Basel III Pillar 3: Market Discipline - Relevant Parts *

General Considerations. I

Sections D - A are not included.

Materiality. H

817. A banking institution must decide which disclosure requirements are relevant based on the principle of materiality. Full disclosure details shall be provided in all cases, including the description of the characteristics in the tables included, "Disclosure on the Composition of Regulatory Capital," "Main Characteristics of Issued Regulatory Capital Instruments," and "Required Adjustments Between the Balance Sheet Disclosures" included in the tables in Appendix 3, regarding "Regulatory Capital Components" and between the published financial reports.

Frequency. V 175, 174

818. When disclosure is required according to the quantitative disclosure requirements determined by this time direction on a quarterly basis, disclosure shall also be provided regarding the "Main Characteristics of Issued Regulatory Capital Instruments" in accordance with the guidance in Section G, despite the disclosure requirements. Additionally, disclosure may be provided on an annual basis, provided that it applies to annual reports according to Section 827. A qualitative summary of the objectives of the banking institution's risk management and policy, which provides sufficient information on significant changes occurring in the definitions and reporting system, shall be provided. However, in some cases, the banking institution's management may determine that a significant change (significant change) has occurred, which does not reflect the recently reported amounts. In such cases, the bank must disclose the nature of its risk profile and briefly describe how these changes are expected to occur.

• . The numbering of the sections of this time direction, including marginal notes, corresponds to the numbering of the Basel III Pillar 3 working framework. However, not all sections included in the Basel III Pillar 3 working framework are included in this time direction. Sections 174 and 175 are not included.

(2/14) [4] Directions for Public Reporting: The Supervisor of Banks

Implementation of Disclosure Requirements of Basel III Pillar 3 - Time Directions 694A –6 'Am

Capital

Table 2: Structure of Capital

Qualitative Disclosure

A. A banking corporation must provide summarized information regarding the main characteristics of its capital instruments as detailed in the table in Appendix 1.

The banking corporation must update this table on an ongoing basis if any of its capital instruments have been issued, redeemed, converted, cancelled, or if there has been a material change in their nature. It is clarified that there is no need to update the table after such an event unless it remains updated.

B. A banking corporation must provide additional disclosure regarding the composition of supervisory capital in accordance with the following guidelines:

• Provide disclosure of ratios based on components of supervisory capital (e.g., "Tangible Common Equity" ratio), adding a comprehensive explanation of how these ratios were calculated.
• Provide full disclosure of all conditions and contingencies related to all instruments included in supervisory capital.

Quantitative Disclosure

C. Disclosure regarding the composition of supervisory capital must be provided in accordance with the guidelines specified in Appendix 2.

D. Quantitative disclosure must clarify the relationship between the published components of capital and the figures in the financial statements, in accordance with the guidelines in Appendix 3.

Table 3: Adequacy of Capital

Qualitative Disclosure

A. A brief discussion of the approach taken by the banking corporation to assess the adequacy of its capital to support its activities, both present and future.

Quantitative Disclosure

B. Disclosures arising from credit risk:

Capital requirements calculated according to risk-weighted assets.

This work on capital was updated in accordance with the document published by the Basel Committee in June 2012, titled "Disclosure Requirements on the Composition of Capital."

** When tables indicate that capital requirements exist for risk-weighted assets, the capital requirements are calculated according to those risk-weighted assets. For example, for a banking corporation that does not meet the definition of a bank, the total capital requirement is double the percentage of 12.5% for risk-weighted assets, which are particularly significant.

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Index of Updates - Instructions on Public Reporting by Banks

Page 699-109 [3] (02/14)

Updates to Transition Instructions regarding Income Measurement dated 2401-06-H (dated 17/10/2013) ("Interest")

Page to Insert	Page to Remove
*(2/13) [1] 672-3	(2/13) [1] 672-3
(10/13) [2] 672-4	(2/13) [1] 672-4
(10/13) [1] 672-4.1	-------
*(9/13) [3] 699-108	(9/13) [3] 699-108
(10/13) [1] 699-109	-------

• This page was reprinted due to the two-sided printing transition following this update. Same text as existing.

Updates to Implementation of Disclosure Requirements dated 2404-06-H (dated 26/11/2013) ("Remuneration Disclosure - Pillar 3 Basel")

Page to Insert	Page to Remove
*(2/09) [14] 630-5	(2/09) [14] 630-5
(11/13) [18] 630-6	(6/09) [17] 630-6
(11/13) [4] 694A-3	(8/13) [3] 694A-3-4
694A-4	------ *(8/13) [3]
(11/13) [3] 694A-21	(8/13) [2] 694A-21
694A-21.1- 21.5	------ (11/13) [1]
*(8/13) [1] 694A-22	(8/13) [1] 694A-22
*(9/13) [3] 699-108	(9/13) [3] 699-108
(11/13) [2] 699-109	-------

• This page was reprinted due to the two-sided printing transition following this update. Same text as existing.

Updates to Transition Instructions for the Year 2013 dated 2408-06-H (dated 02/02/2014)

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(2/14) [18] 661-2	(5/12) [17] 661-2
*(3/12) [16] 661-7	(3/12) [16] 661-7
(2/14) [14] 661-8	(1/13) [13] 661-8
(2/14) [5] 661-8.1	(4/13) [4] 661-8.1
*(4/11) [1] 661-8.2	(4/11) [1] 661-8.2
(2/14) [5] 661-10.3	(1/13) [4] 661-10.3
(2/14) [1] 661-10.3.1-10.3.2	-----
(2/14) [8] 661-10.4	(6/13) [7] 661-10.4
(2/14) [13] 661-15	(12/11) [12] 661-15
(2/14) [1] 661-15.1-15.20	-----

Page 699-110 [1] (02/14)

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*(2/12) [15] 661-16	(2/12) [15] 661-16
(2/14) [2] 661-20.11.1	(11/12) [1] 661-20.11.1
*(11/12) [2] 661-20.12	(11/12) [2] 661-20.12
*(12/11) [10] 664-1	(12/11) [10] 664-1
(2/14) [12] 664-3	(12/11) [11] 664-3
*(12/11) [1] 664-9.1	(12/11) [1] 664-9.1
(2/14) [16] 664-10	(12/11) [15] 664-10
*(11/00) [8] 669-89	(11/00) [8] 669-89
(2/14) [14] 669-92	(12/11) [13] 669-92
(2/14) [1] 673-1-8	-----
(2/14) [2] 674-1	(8/13) [1] 674-1
*(8/13) [1] 674-2	(8/13) [1] 674-2
(2/14) [19] 690	(3/12) [18] 690-1
*(1/04) [11] 690-7	(1/04) [11] 690-7
(2/14) [5] 694A-3	(11/13) [4] 694A-3
*(8/13) [3] 694A-4	(8/13) [3] 694A-4
*(8/13) [3] 694A-5	(8/13) [3] 694A-5
(2/14) [4] 694A-6	(8/13) [3] 694A-6
-----	(7/12) [2] 698B-1
-----	(12/11) [1] 698B-2-31
*(9/13) [3] 699-108	(9/13) [3] 699-108
(02/14) [3] 699-109	(11/13) [2] 699-109
(02/14) [1] 699-110	------