Those excessive bank fees

Excessive control, monopolies: Both unhealthy.

July 1, 2010 06:26
3 minute read.
bank teller 88

bank teller 88. (photo credit: )

We are told, especially by the banks, that bashing banks is populist and unjustified. True to that approach, the banks are now raising the alarm against legislation in the works that would abolish all the fees they levy on all current account activity.

Remarkably, the banks have managed to enlist to their cause Rony Hizkiyahu, the Bank of Israel’s supervisor of banks. In a 180-degree reversal from his predecessor, Yoav Lehman, Hizkiyahu told the Knesset Economics Committee earlier this week that abolishing the most common, most annoying and cumulatively most costly bank fees was unwarranted. He further asserted that, contrary to the persistent impressions of the clientele, such fees are actually going down.

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Hizkiyahu went on to maintain that “significant differences” exist between the various banks and that the “competition between them to attract new clients is stimulated by special promotions which promise fee exemptions and/or discounts, especially to specific target-groups” like soldiers, students and pensioners. These, he insisted, encourage folks to switch to rival banks.

Not unexpectedly, the Israel Consumers Council has firmly disputed Hizkiyahu’s Pollyanna-portrayals. First, it noted that, not long ago, Lehman warned that “bank fees are going up significantly.” And it went on to debunk Hizkiyahu’s competition claims: “Regretfully, in direct contradiction to the supervisor’s superciliousness, there is no genuine competition between banks, which continue to impose undue multiple fees.” Hizkiyahu, the council went so far as to charge, “possesses other figures which he conceals from public view.”

IN FACT, during the first quarter of 2010 alone, the banks accrued a staggering NIS 3.6 billion in profits from fees alone. Concomitantly they raised the usurious interest they charge for overdrafts while paying nil for our deposits. The situation is so grave that Economics Committee Chairman Ophir Akunis (Likud) has been crowing about having reached a special agreement with Bank Hapoalim whereby current accounts in the black would actually be graced with some interest. This, Akunis estimates, will constitute “an enormous boost to competition.” The fact that elementary progress on current account interest required high-level political intervention constitutes some sobering perspective on the banks’ excesses.

The unfortunate truth, as the council noted, is that competition between the banks is negligible. They charge fees in the sort of conjunction which can only be expected of cartels. Thus far, insufficient improvement has been achieved by the Bank of Israel’s much-touted modifications, which were designed to inhibit the creativity with which fees for the most mundane of transactions are inflicted. Dozens of astounding excuses for charging households and small businesses have been scrapped, but we still pay such surcharges as the “teller fee.”

Any time clients show up in their branch, stand on line and seek to involve the bank’s personnel in the most routine of tasks, they are essentially fined for not resorting to automated alternatives or computer services. Such fines/fees range from NIS 5.50 to NIS 7 per transaction. We likewise fork out to have a salary or pension deposited in our account, to deposit or cash a check, withdraw money or use credit cards.

Some banks may charge a fraction less for some fees, but are costlier on others. Predictably, the expense is borne chiefly by the less affluent or older population, leery of impersonal banking or unable to do its banking online. Moreover, even automated procedures, such as at ATMs, are pricey.

Some years ago, the Israel Antitrust Authority launched an extensive open investigation amid suspicions that banks coordinate their terms, making it impossible for their clientele to behave as wise consumers. It expired with a whimper. What remains is the popular perception that we pay exorbitant interest when borrowing but get laughable rates on savings.

THE BANKS are wrong to challenge the new attempt at a crackdown. It is their gross insensitivity and inflated charges that have prompted what they denigrate as populist legislation and stringent regulation, both ostensibly detrimental to a free-market economy.

Free enterprise isn’t synonymous with laissez-faire. If those who wield inordinate clout don’t control themselves, they will find themselves controlled externally. Excessive control may be unhealthy, but so are monopolies. In the end, they sap initiative and obstruct the market’s life-blood.

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