Banks regulator rejects Treasury call to ease capital adequacy

Supervisor of Banks Rony Hizkiyahu has rejected calls from the Ministry of Finance to ease banks' capital requirements, and to delay the 12% capital adequacy ratio obligation from 2009 to the end of 2010.

Hizkiyahu said, "The solution is not to expand bank credit incautiously that would be a mistake. Bank credit will increase each month and continue to grow, but banks will not extend credit to someone who should not receive it. The solution is to revive the non-bank credit system."

The Supervisor of Banks spoke at a press conference today marking the publication of the Basel II - The New Basel Capital Accord of the Basel Committee on Banking Supervision guidelines.

Hizkiyahu placed the responsibility for dealing with the issue on the Ministry of Finance. "We need to act so that the capital market will return to work and give credit and help to the extent possible. Why are pension funds sitting on the fence, and buying treasury bills and not giving credit? Anyone who expects that at a time of crisis the banks' credit policy won't be very conservative will get to a point where today's crisis is nothing compared with the crisis of tomorrow. Look around the world at what happened to banks that went wild.

"There are all kinds of stories about a supposed rift with the Ministry of Finance," said Hizkiyahu. "I want to make clear that there is no connection between a capital adequacy ratio of 12% and the Basel II guidelines. Basel II deals with allocating capital according to risks. A capital adequacy ratio of 12% stems from the fact that I dealt with raising the banks' capital adequacy ratios to the level accepted in OECD countries."

Published by Globes [online], Israel business news - www.globes-online.com - on January 5, 2009

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