By Amit Sharvit
Israel's banks are substantially increasing their second-half provisions for specific doubtful debts. The extra provisions will appear in their financial statement for the third and fourth quarters of 2001.
The amount set side for specific cases will be deducted from the extra non-specific provisions demanded by the Supervisor of Banks for the second half.
The supervisor agreed that the banks may offset the amounts, as long as their specific provisions are 25% greater than in 2000.
A leading banker criticized the supervisor's decision regarding the specific provisions. The banks could be tempted to make ill-judged specific provisions in order to avoid the general provisions, he said, because specific provisions are recognizable expenses for tax purposes, while the general provisions that the supervisor demands are not.
The Bank of Israel's watchdog has directed each of the commercial banks to set aside 0.15% of their total estimated assets at risk on September 30, in each of the third and the fourth quarters of 2001. Only Bank Discount received an exemption, on the grounds that it alone had made sufficient provisions to counter the worsening economic environment.
On another front, Tal has ordered the banks to make an NIS 150 million specific provision for loans extended to businessman Gad Zeevi in order to buy a 20% stake in the Bezeq phone company, because of a growing gap between the shrinking value of his collateral and the magnitude of the outstanding loans. Also, Zeevi has been defaulting in interest payments.
Although the banks have been talking about having the value of the collateral Bezeq shares re-assessed, the banking source noted that the banks did not object to this particular special provision ¿ possibly, again, because they can recognize the provision for tax purposes.