By Steven Scheer

JERUSALEM (Reuters).-Israel’s banking regulator stated Monday that Israeli banks can resume regular split payouts beginning in 2022. This cancels a temporary directive issued at the start of the COVID-19 Pandemic. It also cautions banks about market uncertainties caused by the virus.

According to the Bank of Israel, “With the recovery to economic order, there was less need to ease the bank corporations’ banking activities.” The temporary directive will end on January 1, 2022.

To ensure sufficient credit was available to banks to loan to companies during the COVID-19 epidemic, dividend payments and stock buybacks were stopped in March 2020. Banks were granted a 1 % reduction in their minimum capital ratio.

The central bank’s Banking Supervision Department stated that it believes the return of orderly activity allows banks to predict capital needs and give dividends.

It said that banks should be cautious when considering the business model, and take into consideration the uncertainty inherent in markets due to, among others, new viruses being discovered.

Israeli banks are recovering well after a difficult 2020. Profits have risen sharply over the three quarters to 2021, thanks to the winding down of last year’s provisions that were intended protect loan defaults.

In August, the banking regulator allowed banks to pay special dividends that were based up to 30% of their 2020 net profits. This policy was extended through 2021. However, banks have vowed to return to 40% profit payouts or higher.

The top Israeli banks, Hapoalim and Leumi, Mizrahi-Tefahot as well as Israel Discount, Israel Discount, First International, announced special dividends for the third quarter. These were based on the net profits from the nine first months in 2021.

After a 22% decline in 2020, shares of the Index of Israel’s Five Largest Banks in Tel Aviv have increased 58% in this year.