"Consumer credit has risen sharply, and we have reached the point where we have to be careful. Credit is like salt in food - food without salt has no taste, but too much salt tastes bad and is unhealthy. If we think that the problem is continuing and growing, we'll intervene. We have many tools, and we won't hesitate to use them," Supervisor of Banks Dr. Hedva Ber said today at a press conference held with the publication of a report by the Bank of Israel Banking Supervision Department. Ber added, "Credit has increased because the low interest rate is a temptation, and it is very available. My 13 year-old son got a message asking if he wanted a loan with no identification of the concern that sent it, and I think that's a serious matter. This lack of identification is likely to change soon following the enactment of legislation."
Ber continued, "We did several audits of banks last year, which revealed that the risk was increasing." She revealed data from the audit showing that a quarter of consumer credit was taken for a period of 6-9 years. A third of the loans are for current consumption, a quarter are for refinancing an existing loan, and 13% was for buying a car.
Ber commented on the subject of write-offs by banks for borrowers, saying, "More households are reporting difficulties in repaying their debt, and the banks' ability to collect the debt has declined. There is an increase in both gross and net write-offs. Debt should be repaid, whether by a large business or a household. We won't make concessions in this. At the same time, when difficulties like unemployment or disease are encountered, we expect the bank to be fair to the customer, and to reach a dignified arrangement for him."
Ber also said that the probe had shown that customers were insufficiently aware of their situation, and called on them to bargain over the interest rate. "In our audit, we found that low-risk customers were not bargaining over the interest rate, and were paying higher interest than justified by their risk. I call on customers to compare offers and bargain over interest rates," she said.
Ber called on the banks to downshift on consumer loans, saying, "The pendulum has to be balanced. Up until 2011, the banks took the size of borrowers into account. Later, following regulatory failures and changes, the pendulum swung back towards households and small businesses, and that was right. Now more balancing is needed again. The focus should be more dispersal among businesses and households, so that we don't leverage them too much."
Commenting on the increase in credit for car purchases, Ber said, "There was a major increase, and household norms have changed. They once called an advanced training fund a Subaru fund, because they used it to buy a car when it was released. People used to buy cars with their own money and savings. There's a significant change now; people are buying cars with credit, and there's too much leverage. The credit is low-risk, because there is security for it, but it is rising rapidly, and so we have to be careful in this aspect."
Published by Globes [online], Israel Business News - www.globes-online.com - on May 24, 2017
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