IMF published its staff report and selected issues report after concluding the 2018 Article IV consultation with Israel. The IMF assessment points to a healthy banking system. The staff recommends that banking supervision should continue its efforts to operationalize a risk-focused approach. Financial regulators should harmonize regulations in areas of overlapping activity to avert regulatory arbitrage. Moreover, safeguarding the operational independence of financial regulators remains critical to their effectiveness.
The staff report reveals that the banking system in the country is healthy. Capitalization, loan quality, and profitability continued to improve in 2017. The leverage ratio rose to 7.5%, which exceeds that in most advanced economies. All of the five large banks (accounting for 95% of banking sector assets) met the capital requirement, enabling them to resume or raise dividend payouts in 2017. The five largest banks account for 95% of the banking sector assets and, therefore, the authorities are taking a range of measures to promote competition in the sector. Entry of new banks would be welcome, with appropriate deposit insurance and resolution arrangements to contain fiscal costs from potential failure. Reinforcing the financial stability framework is critical to complement the progress being made on enhancing competition. Adoption of the Solvency II framework in 2017 by the Capital Market, Insurance, and Saving Authority (CMISA) is a welcome step, with the aim to achieve full compliance by the end of 2024.
The authorities are also taking welcome steps to enhance the management of technological risks, including those from fintech, and improve Cyber Security. The Bank of Israel supports innovation in the banking system by streamlining the approval process for new products, while allowing for digital banks, cloud technology, and the sharing of IT and operational infrastructure. The Bank of Israel intends to step up the monitoring of risks that could emerge as fintech activities increase. Close coordination among regulators in relation to fintech may better facilitate fintech development and utilization. The Bank of Israel, in conjunction with the National Cyber Authority, the MoF, and banks, has established a Banking Cyber Center in 2017 to facilitate inter-agency sharing of intelligence about cyber alerts and help deal with cyber events that affect banks.
The selected issues report analyzes the macro-fiscal implications of an increase in infrastructure spending and discusses the trends in inequality and poverty in Israel, while exploring policy measures to address these issues.
Keywords: Middle East and Africa, Israel, Banking, Insurance, Financial Stability, Solvency II, Article IV, Fintech, IMF
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FSB confirmed the Regulatory Oversight Committee (ROC) of the Global Legal Entity Identifier System (GLEIS) as the International Governance Body for the globally harmonized identifiers used to track over-the-counter (OTC) derivatives transactions, with effect from October 01, 2020.
FCA is consulting on its approach to the authorization and supervision of international firms operating in UK.
EBA launched the seventh annual transparency exercise for banks in EU.
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MAS published amendments to the Notice 652 on net stable funding ratio (NSFR), along with the related reporting template.
EC published the action plan to enhance the Capital Markets Union in EU over the coming years.
EC adopted a package that includes the digital finance and retail payments strategies and the legislative proposals for regulatory frameworks on crypto-assets and digital operational resilience.
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APRA updated the lists of the Direct to APRA (D2A) validation and derivation rules for authorized deposit-taking institutions, insurers, and superannuation entities.
MAS published amendments to Notice 637 on the risk-based capital adequacy requirements for reporting banks incorporated in Singapore.