Four months before Directive No. 325 of the Proper Conduct of Banking Business, which deals with the management of credit lines in current accounts, comes into effect, half of current accounts at banks still have no agreed credit limit. 894,000 current bank accounts had excessive overdrafts at the end of January 2006, 7.7% fewer than the 961,000 accounts in December 2005, according to the Bank of Israel Banking Supervision Department.
The Bank of Israel states, “Of the 3.3 million current accounts and overdraft facilities in the largest five banks, only 53% have a credit agreement with the customer in operation, in 20% of the accounts the banks have made a credit line available unilaterally, and 27% of the accounts were still operating at the end of January without any arrangement.”
Most of the problem is with households. 92% of the unilateral credit arrangements are for private customers. A bank may unilaterally determine a credit arrangement until the end of 2006. Business customers are better informed about the credit problem, and 71% of business customers have signed a credit arrangement with their bank.
Implementation of Directive 325 was postponed from January to July, because many bank customers had not yet arranged credit frameworks for their current accounts. The Banking Supervision Department says insufficient progress has been made in implementing Directive 325. The department said there was considerable difference between the banks in preparing for the directive, with the number of accounts without credit arrangements varying between 8% and 70%.
Published by Globes [online], Israel business news - www.globes.co.il - on February 26, 2006