Finance Minister Moshe Kahlon.
(photo credit: MARC ISRAEL SELLEM)
Finance Minister Moshe Kahlon on Monday expressed consternation at an interim plan to increase competition in the credit market, saying it did not go far enough, even as the Bank of Israel averred that further action could lead to financial instability.
“I am saying here in the clearest way possible, I am not committing to accepting all its conclusions. If there are things that I need to change, I will work to change them,” Kahlon said.
The plan, from the Strum Committee’s interim report on increasing competition in the banking system, would require Bank Hapoalim and Bank Leumi to sell off their credit- card businesses.
It would also create an easier regulatory framework for nonbank credit providers; establish a credit data register and related tools to help provide customers with information that would help them negotiate better credit deals; and provide deposit insurance to help small banks enter the market.
In his election campaign, Kahlon’s platform of increasing competition in the economy specifically focused on the financial market. Consumers, he said on Monday, were “getting screwed” by a system in which three banks (Hapoalim, Leumi and Discount) controlled 73 percent of the market.
The Bank of Israel, however, has repeatedly expressed concern about overreach, saying excessive competition could lead to instability in the financial system, which could wreak havoc on the economy.
“We must not forget the lessons of the most severe financial crisis in our generation, which was caused by irresponsible measures and inadequate supervision. It is important to remember that in the past three years the balance of consumer credit has increased cumulatively by about 20%, and credit to small businesses by about 30%,” Bank of Israel Governor Karnit Flug has said.
In a seeming rebuke to Kahlon, Flug warned against straying too far from the report’s recommendations, which on the whole favored her more conservative approach.
“The issues which the Bank of Israel opposes reflect, from the Bank’s professional perspective, measures that are liable to negatively impact the public and serve as a marked risk to the stability of the economy,” Flug said of measures that are still under debate.
“It is important that financial system reforms are made with agreement, as a lack of agreement will hamper the ability to implement the recommendations in practice,” she added, indicating that the recommendations at hand would have a significant impact on the credit market.
Dror Strum, who led the committee, said the series of reforms under consideration would help consumers and small businesses gain access to the NIS 300 billion credit market in Israel.