Israel: lending & credit regulation

Regulated

Bank of Israel supervises lending via Proper Conduct Directives; non-bank lenders regulated by Ministry of Justice

Lead regulator:: Bank of Israel
Key law:: Bank of Israel Law, 5728-1968 and Proper Conduct of Banking Business Directives
Last updated:: 2026-07-12

Banking corporations in Israel are strictly regulated by the Bank of Israel’s Banking Supervision Department under the Proper Conduct of Banking Business Directives. These directives govern credit risk management, borrower indebtedness limits, and specific procedures for housing and consumer loans. Non-bank lending entities are primarily supervised by the Ministry of Justice under the Consumer Credit Law.

Recent regulatory focus has included tightening capital requirements for real estate exposures and implementing temporary flexibilities to support the economy during the Swords of Iron War. The regulatory framework emphasizes prudent risk management, transparency in consumer credit, and strict limits on concentration risk within the banking sector.

Who regulates

Bank of Israel
Primary supervisor of banking corporations and credit card companies for lending activities
^[1][2][3]
Ministry of Justice
Supervisor of non-bank consumer credit providers

Core laws & rules

Proper Conduct of Banking Business Directives (2012 (with frequent amendments))
A comprehensive set of directives issued by the Bank of Israel governing credit risk management, borrower indebtedness, housing loan procedures, and consumer credit management for banking corporations.
^[4][3][5]
Bank of Israel Law (1968)
The foundational statute establishing the Bank of Israel and granting it supervisory authority over banking corporations.

Licensing & registration

Banking Corporation License
Required to extend housing and consumer loans as a banking corporation. Subject to strict capital adequacy and credit risk management standards.
^[4]
Consumer Credit License
Required for non-bank entities providing consumer credit, regulated by the Ministry of Justice.

Restrictions & warnings

Strict limits on borrower indebtedness: single borrower exposure capped at 15% of bank capital (10% for speculative activities).
^[6]
Housing loan LTV limits: 75% for sole dwellings, 70% for replacement dwellings, and 50% for investment properties.
^[5]
Industry indebtedness capped at 20% of public indebtedness (24% for construction/real estate).
^[7]
Prohibition on marketing credit for financial asset purchases to prevent conflicts of interest.

Direction of travel

Regulatory focus remains on mitigating credit risk in real estate and construction sectors, with increased risk weights for high-LTV loans.
^[1][8]
Temporary regulatory reliefs introduced during the Swords of Iron War have been extended or modified to support economic stability.
^[9][10]

Sources

Revision of Directive 203 on Credit Risk Standardized Approach and Directive 329 on Housing Loan Limitations · 2025-04-06
Regulatory framework for measuring and controlling large exposures (LEX10–LEX40) · 2025-02-04
Supervisor of Banks: Proper Conduct of Banking Business - Consumer Credit Management · 2021-12-29
Credit Risk Management · 2023-11-07
Limitations on Issuing Housing Loans · 2021-12-27
Limitations on the Indebtedness of a Borrower and a Group of Borrowers · 2025-01-01
Industry Indebtedness Limitation · 2024-10-29
Update of Proper Conduct of Banking Business Directive 203 · 2024-02-08
Adjustments to Proper Conduct of Banking Business Directives for the Swords of Iron War · 2024-12-31
Adjustments to Proper Conduct of Banking Business Directives for Swords of Iron War · 2024-12-30

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This guide is compiled automatically from 10 primary-source documents published by Israel's regulators, reviewed by RegAlert, and refreshed monthly (last updated 2026-07-12). It is not legal advice — always confirm requirements with the regulator or local counsel before acting.