'Banks took advantage of fee reform'

Some banks exploited the recent bank-fee reform to raise tariffs or cancel certain discounts for customers, Banking Supervisor Rony Hizkiyahu said Sunday.

By SHARON WROBEL
September 1, 2008 11:28
3 minute read.
'Banks took advantage of fee reform'

Rony Hizkiyahu 2 88 224. (photo credit: Ariel Jerozolimski)

Some banks exploited the recent bank-fee reform to raise tariffs or cancel certain discounts for customers, Banking Supervisor Rony Hizkiyahu said Sunday. "Some banks took advantage of the reform to cancel discounts and charge higher fees," he told the Knesset Economics Committee. "The reform does not forbid discounts. I urge the banks not to wait until the end of the quarter, when we will get more data on the success of the implementation of the reform and force them to make changes. If the banks don't act to create more competition, we will intervene and intensify regulation." On the day the reform came into effect on July 1, Hizkiyahu said, some banks canceled discounts, such as reduced charges for university students, while others increased certain fees to offset loss in revenues from the reform. Bank Hapoalim said it expected a NIS 200 million loss in revenues, while Bank Leumi said it would lose NIS 90m. as a result of the reform "The reform has succeeded in its target of increasing transparency and raising public awareness, but it is too early to draw conclusions on whether it has created the desired competition among banks for household accounts," Hizkiyahu said. "At the moment, we only have partial or temporary data from the banks. In October, marking the end of the first quarter after the implementation of the reform, we will be able analyze more comprehensive data, find the weak spots in the reform and intervene accordingly to create competition among the banks." MK Gilad Erdan (Likud), former chairman of the Knesset Economics Committee and one of the initiators of the bank-fee reform, called on Hizkiyahu to penalize banks that took advantage of the reform. "Banks exploiting the reform or acting against its principles should pay a fine of NIS 750,00," he told the committee. The reform was not enough to create real competition in the banking sector, Ronen Regev, representing the Public Trust's research division, said. Further measures were needed, he said, such as the separation of credit-card companies from banks and the full entry of the Postal Bank to the market. Facing continued pressure from Knesset members and consumer organizations, Hizkiyahu has already started to take steps to make corrections to the bank-fee reform. In an attempt to limit its negative impact, the elderly and those who have no access to directbanking services will be entitled to four teller-assisted actions per month for the same cost as direct services starting September 1. Furthermore, the fee for depositing a check using envelope-deposit drop terminals, which is similar to a teller-service charge, will be reduced to the level of the fee for direct services. In addition, according to the reform corrections, banks will not be allowed to classify house committee [Va'ad Bayit] accounts as small-business accounts, which are charged higher fees. The bank-fee reform was supposed to create competition in the overly concentrated banking sector and thereby bring down charges. However, the consumer price index published in mid-August by the Central Bureau of Statistics revealed that the bank-services item of the index, which includes bank fees, rose by 16.2 percent in July. The Banking Supervision Department said the CBS figures were distorted, since they are based on average fees across the sector, which do not yet take into account the reduction in the number of fees and the trend to lower fees due to stronger competition among the banks. In addition, the department said, the CBS based its figures on the banks' fee-tariff schedule, but many customers are not paying the full rates. The reform reduced the number of fees from 198 to 72; certain fees, such as for credit frameworks, were abolished altogether, but most fees on checking account transactions were raised. Under the new bank tariffs, fees and commissions for checking accounts are cheaper for customers who use directbanking services, ranging from NIS 1.35 to NIS 2.9 per operation. But they are more expensive for those who conduct their transactions via tellerassisted services, which are mainly used by the elderly and the poorer sections of the population. Teller-assisted services are now charged between NIS 5.5 and NIS 7


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