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Economy12 hours back (Dec 13, 2020 06: 20 AM ET)
© Reuters. People wear protective face masks as they shop at a market amid Israel’s second-wave coronavirus disease (COVID-19) lockdown, in Jerusalem
By Steven Scheer
JERUSALEM (Reuters) – The Bank of Israel said on Sunday it would start providing repo deals with supervised non-bank credit providers to increase the supply of credit to very small companies having a hard time to borrow due to the COVID-19 crisis.
It said the brand-new monetary tool would begin running in the first week of January, with the objective of enhancing credit supply to these services beyond what is released by banks.
These non-bank providers, such as credit card companies and institutions, would be monitored by the Bank of Israel or the Finance Ministry’s capital markets division.
” In view of the crisis, decreasing the cost of the funding source for non-bank credit service providers will produce a reward for them and add to the pass-through from the general rate of interest in the economy to the interest paid by small and micro organizations for the credit issued to them,” the reserve bank stated.
Throughout the coronavirus pandemic the central bank has attempted to help small businesses by method of extremely low interest rate loans to banks, while allowing loan payment deferments.
As part of the repo deals, the Bank of Israel will get tradable collateral from the credit card and other providers, including federal government costs and bonds and corporate bonds under particular requirements.
The interest rate will be set at 0.1%percent and topic to the arrangement of credit to small and micro businesses at interest of as much as prime plus 1.3%percent and fixed at a rate of -0.1%.
The transactions will be for 6 months, with the possibility of an extra 6-month period under the same terms, the bank reserve bank stated.
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