“There is uncertainty regarding the continuation of economic developments, which may have a negative impact on banks’ profitability for fear of damage to credit quality, due to damage to borrowers’ ability to meet their loan repayments.” This is what the supervisor of banks Yair Avidan warns, in a review for the first half of 2022.
According to him, “On this background, the banks maintain capital ratios higher than the minimum capital requirements established by the supervision, which ensures their stability.” The banks will publish their third quarter reports on Wednesday, November 23. The global economy and financial systems are facing a series of challenges following the Corona crisis and the Russia-Ukraine war.
The disruptions in the supply chains led to an increase in commodity prices all over the world, and inflation began to rise to levels not seen in the last decade. In response to the increase in the inflationary environment, the central banks and also the Bank of Israel began raising interest rates. The financial statements show high returns on capital, improvement in efficiency ratios, adequate capital and liquidity ratios and good credit quality. The Bank of Israel admits that the increase in interest rates and inflation is beneficial to the banks in the short term, thanks to the increase in interest income.
The return on equity in the first half of 2022 was 15.8%. The increase in the Bank of Israel interest rate also translated into a certain increase in the interest rate on public deposits. As a result, the Bank of Israel began to publish the interest rates paid by the banks, and the interest on fixed-term credit with a variable interest rate.
Wise financial conduct of the households and examination of the products suitable for them and comparison of offers and prices can increase bargaining power.