"With the return to orderly economic activity, the need for
providing easings to banking corporations in their banking
activities declined," the Bank of Israel said. "Therefore,
beginning from January 1, 2022, the temporary directive will
expire."
Dividend payments and share buybacks were suspended in March
2020 to ensure banks had sufficient credit to lend to businesses
during the COVID-19 pandemic. In return, banks received a 1%
reduction in minimum capital ratios.
The Banking Supervision Department at the central bank said it
was of the view that the return to orderly activity enables
banking corporations to forecast capital needs and to distribute
dividends.
"However, when deciding on the distribution of dividends, banks
are required to act with caution when examining the business
model and to take into account that there is still some level of
uncertainty in the markets, deriving from, among other things,
the development of new mutations of the virus," it said.
After a weak 2020, Israeli banks have recovered well from the
crisis, posting sharp gains in profit over the first three
quarters of 2021 amid the unwinding of provisions made last year
to protect against loan defaults.
The banking regulator in August allowed banks to distribute
special dividends based on up to 30% of 2020 net profit and
extended that policy through the end of 2021. Banks, though,
have sought to go back to payouts of 40% of profit or more.
Israel's top banks -- Hapoalim, Leumi, Mizrahi-Tefahot, Israel
Discount and First International -- also announced large special
dividends in the third quarter based on net profit from the
first nine months of 2021.
Shares of the index of Israel's five largest banks in Tel Aviv
have jumped 58% this year after a 22% fall in 2020.
(Reporting by Steven Scheer; editing by Stephen Coates and Jason
Neely)
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