Bank of Israel issues proportional supervisory framework for small and new banks with permanent tiers up to NIS 50 billion in assets

The Bank of Israel's Banking Supervision Department has issued a new supervisory framework for small and new banks that tailors regulatory and supervisory requirements to a bank's scale and systemic importance. The new directive replaces the 2020 framework for new banking corporations, expands the adjustments available, and extends the approach beyond newly formed banks to existing banks based on their characteristics. The measure was developed in the context of efforts to increase competition in retail banking and lower barriers to entry. The framework creates three permanent supervisory tiers based on total assets: up to NIS 15 billion, above NIS 15 billion and below NIS 50 billion, and above NIS 50 billion. When a bank crosses either threshold, the Supervisor may grant a transition period of up to two years before it moves to the next tier. For newly licensed banks, the directive also provides preparatory phases of up to three years, with possible extensions of up to two additional years, to allow gradual implementation of applicable requirements. Regulatory adjustments cover capital and leverage, liquidity and its calculation, concentration and borrower limits, board size and composition, consolidation of functions and outsourcing, risk management tools, and flexibility for business models suited to small and digital banks.