Bank of Israel conducts stress test to check banking system's credibility



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Bank of Israel conducts stress test to check banking system's credibility

The Bank of Israel has reportedly conducted a stress test to determine the exposure of its banking system to potential macro-economic crises. Reuters reported that the test results revealed the banks, while suffering losses, would nonetheless not be severely hampered on account of any such crisis situation developing.

The Middle-eastern nation's central bank said, "Rising unemployment, the decrease in GDP and the housing crisis make it difficult for households and the business sector to meet their obligations, which causes serious losses in the banks’ credit portfolio and damage to their equity."

Further calculating the extent of losses to the public money in the event of any problems arising, Bank of Israel said it would be around US$3.4 billion (around 12.2 billion shekels), which totalled to about 1.2 per cent of the banks' existing financial assets.

This stress test comes after Amir Yaron, the bank's governor had cautioned about complacency in the banking sector. He said, "We must continue thinking of where the next crisis may come from, and continue monitoring and strengthening the system’s resilience."