Central bank says measures bring financial relief and ease cash crisis following Hamas attack and ongoing war

By SHARON WROBEL17 octobre 2023, 12:33

The municipality of Sderot reports that a building was hit by rockets on 13 October 2023. (Credit: Municipality of Sderot)

Israeli banks and credit card companies have agreed on a financial aid programme designed to ease the burden of loans – property or otherwise – and related costs for households and businesses close to the Gaza Strip, first-degree relatives of those killed or kidnapped in last week’s Hamas attack, and mobilised reservists, the Central Bank of Israel announced on Sunday evening.

Israel has been at war with Hamas since the massacre perpetrated by the terrorist organisation on 7 October, with the help of 1,500 terrorists from the Gaza Strip who entered Israeli territory by land, air and sea, killing more than 1,400 people, wounding nearly 4,000 and capturing 200, of all ages, under a barrage of thousands of rockets fired at Israeli towns.

The vast majority of victims of the atrocities committed by the armed men are civilians – men, women, children and the elderly. The rocket attacks have led to the closure of many businesses and schools.

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To deal with this emergency situation, the Banking Supervision Department has asked lenders and credit card companies to implement a programme specifically designed to ease the burden of credit and overheads for four types of customer: households and businesses within a 30-kilometre radius of the barrier with the Gaza Strip, Israelis evacuated from their homes, reservists and first-degree relatives of Israelis killed, kidnapped or missing.

Under this aid programme, eligible homeowners will be able to suspend their repayments for a period of three months without interest or additional charges. Households will also be able to defer their consumer loan repayments for three months, up to a maximum of 100,000 shekels, and businesses will be able to defer their loan repayments up to a maximum of 2 billion shekels.

Homeowners will have the option of paying these monthly instalments in one go at the end of the mortgage, or gradually. For example, a homeowner with a 20-year mortgage who makes monthly repayments of 3,000 shekels will be able to pay the 9,000 shekels deferred at the end of the loan at no extra cost.

Volunteers prepare aid parcels and supplies for evacuated Israeli soldiers and residents in Tel Aviv on 12 October 2023. (Credit: GIL COHEN-MAGEN / AFP)

Consumers and businesses who suspend repayment of their loans will have to pay the deferred amounts at the end of the loan period.

In addition, the four categories benefiting from these reductions will be exempt, for a period of three months, from the payment of fees for maintaining their current account or other fees, with the exception of those relating to foreign exchange, securities and foreign trade transactions.

‘In these difficult times, we all have to do something, and it is important that the banks offer solutions to the population to deal with the economic difficulties caused by the war’, said the Governor of the Central Bank of Israel, Amir Yaron. ‘We have brought together the leaders of the banking system to define a coherent plan, focusing on helping the population that has been hardest hit, the security forces and those who have had to be evacuated.’

‘I am certain that this plan will help the population to get through this difficult period’, added Mr Yaron.

Israel’s biggest lenders, who reaped huge profits last year thanks to high interest rates on loans and mortgages, have been criticised for not redistributing much. What’s more, the sharp rise in interest rates, from a record low of 0.1% in April 2022 to 4.75%, has rapidly added to the bill for holders of mortgages and other loans. On average, monthly repayments on home loans have risen by 1,000 shekels over the past year.

‘The solidity and robustness of Israel’s banks has been built up over the years in order to provide the best possible support to the Israeli population, particularly those adversely affected by the war,’ said bank supervisor Daniel Hahiashvili. ‘The plan we are publishing is an important milestone, providing a response in the areas of credit and costs borne by households and businesses.

‘This will also ease the strain on their cash flow’, added Mr Hahiashvili, estimating the cost of the plan at between 2 and 3 billion shekels.

Other bank customers will also be able to defer the monthly instalments on their mortgages and other loans for a period of three months. These monthly instalments will be paid at the end of the loan period at an interest rate not exceeding that stipulated in the loan contract, in accordance with instructions from the Central Bank of Israel. The Central Bank added that there would be no charges or penalties for deferring these instalments.

According to information from the Central Bank, these measures will come into force by 31 October.