Jerusalem, 8 February, 2026 (TPS-IL) — The Bank of Israel’s Banking Supervision Department today, Sunday, published for public comment a draft of a new Proper Conduct of Banking Business Directive titled “Supervisory Framework for Small and New Banks,” a step, it said, in the direction of opening up the country to new small banks.

The new directive establishes supervisory tiers based on the size of the banking corporation. For each tier, it defines regulatory requirements that correspond to the bank’s scale and systemic importance. Given the significant challenges and resources involved in establishing a bank and meeting regulatory obligations, the directive also introduces a preparatory phase for newly licensed banks, allowing them to gradually implement the requirements applicable to their supervisory tier.

The adjustments are designed to balance the need to ease the regulatory burden on small and new banks and to allow for gradual implementation, with the need to maintain institutional stability, fairness toward customers, and the provision of proper banking services.

In developing the directive, dozens of existing Proper Conduct of Banking Business Directives were reviewed, and for each, adjustments were considered based on the bank’s size and complexity, the feasibility of gradual implementation, and insights from consultations with the public and relevant stakeholders.

The adjustments provide significant relief for small and new banks, including in the following areas: capital and leverage requirements; liquidity requirements and their calculation; limits on industry and borrower concentration; the size and composition of the board of directors; the ability to consolidate functions within the bank’s organizational structure and outsource certain functions; risk management tools; and the flexibility to adopt business models suited to small and digital banks. These adjustments are designed to maintain financial stability and uphold principles of fair customer service.

Gil Tanenbaum

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