Supervisor of Banks Yitzhak Tal has acceded to Israel Discount Bank's request to exempt it from the requirement to provide extra provision for doubtful debt in the third and fourth quarters of this year.

The exemption is for the bank alone, not for its subsidiaries or affiliates such as Mercantile Discount Bank, Discount Mortgage Bank of the First International Bank of Israel (FIBI).

The Bank of Israel's Supervisor of Banks directed Israel's commercial banks to increase their provision for specific and general doubtful debt, which he estimated had failed to factor in the depth of Israel's economic crisis.

The Bank of Israel wants 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.

Over four years, Bank Discount has written off about a third of its book value due to doubtful debt, mainly thanks to its high exposure to the real estate industry.

The bank set aside 1.27% of its total credit to the general public in the first half of 2001, while the other banks averaged 0.4% of their credit to the general public.

Discount claimed that it alone had made adequate provision and should be exempted from the directive.

The total extra provision for doubtful debt by Israel's banking establishment is expected to reach about a billion shekels. But investment house Menorah Gaon estimates the total to be a lower NIS 850 million.

Bank Hapoalim calculates its extra provision at NIS 420 million. Leumi estimates its provision to be NIS 380 million, Bank Discount said its would have been NIS 195 million (now irrelevant), Bank Mizrahi is looking at NIS 95 million and FIBI, NIS 86 million.