We lowered the Bank of Israel’s rate as inflation was dropping, to reach 0.1% in March of 2015 when 12 month inflation reached what turned out to be its lowest point at –1%.
This is particularly true in a sector that is changing as quickly as banking. So it is up to the supervisor to adapt the capital requirements to a bank’s specific risk profile in order to cater for deviations from the average case. To this end, the rules should be principlebased and leave sufficient discretion to the supervisors.