Banks Expected to Weather Worst-Case Pandemic Scenario

Even in the worst-case scenario entertained by analysts, Israel’s banking system is strong enough to weather the economic stresses caused by the coronavirus, according to the Bank of Israel.

That is, even in the event of a tenfold increase in credit losses, the banking system will retain its stability.

The BoI’s Financial Stability Report for the First Half of 2020 posited that were there a rise in expenses for credit losses from less than 0.3% in 2019 to 3.3% of the total credit portfolio, or in an even more extreme case to almost 4.7% of the portfolio, the system would continue to operate normally, Globes reported on Sunday.

“Clearly the scenarios we present are not superior to other scenarios, but the tool allows quick analysis — even if somewhat crude — of the sensitivity of the banking system to various levels of credit losses,” the report said, meaning that the figures in discussion are only meant to give a rough idea of what could happen.

The bottom line appears to be that despite the buffetings that the economy has taken already and may take in the near future, the BoI’s assessment is that “the banking system remains robust.”