Two months after Bank of Israel Regulation 325 on credit limits came into effect, 31% of current bank account holders, about one million persons, still have not settled credit limits with their bank. 320,000 current accounts had no credit limit at the end of August, and an additional 672,000 current accounts had unilateral credit limits that will expire on January 1, 2007, states the Banking Supervision Department, which is monitoring the banks implementation of the regulation.
The Bank of Israel says a tenth of current bank accounts have no credit limits, and that the banks unilaterally set credit limits for an additional 21% of current accounts, as an interim solution. 90% of the unilateral credit limits are for private customers. 14% of current accounts have excess overdrafts, considerably fewer than in 2005. At the end of August, 13% of banks’ private customers and 23% of small business customers had excess overdrafts. The Bank of Israel said, however, that most of the excess overdrafts were small sums of up to NIS 500.
The Bank of Israel added that the ban on excess overdrafts had improved the composition and patterns of credit use by current account holders. Aggregate authorized credit limits rose from NIS 55 billion at the end of December 2005 to NIS 70 billion at the end of July 2006. This increase has reduced current accounts’ aggregate overdrafts from NIS 39.2 billion at the end of 2005 to NIS 35.8 billion at the end of July.
The breakdown of credit has also improved. Credit within credit limits rose from NIS 27 billion at the end of December to NIS 30 billion in July, while the amount of excess credit fell 49% from NIS 12.1 billion to NIS 6.2 billion.
Published by Globes [online], Israel business news - www.globes.co.il - on October 4, 2006
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