The Bank of Israel's Supervisor of Banks Rony Hizkiyahu on Wednesday vehemently defended the bank fee reform, promising that it will lead to reduced fees in the banking sector. "I hereby promise that at the end of the day the bank fee reform will lead to reduced fees for banking services - otherwise we will make corrections," said Hizkiyahu at a press conference in Jerusalem on Wednesday presenting the annual 2007 banking supervision report. "It is too early to judge the reform. It is a process during which we are continuously examining the fees charged by the banks, and in cases where we see that there is no competition or fees are unjustified we will make corrections and adjustments." Hizkiyahu added that evidence from the short period since the new bank fee tariffs were presented on June 15 showed that competition between the banks had already commenced. "Since the bank fee reform came into effect 60 price reductions have been made among different banks, of which 19 were instituted by the banks themselves and the rest by the banking supervision," said Hizkiyahu. "For example, some banks have stopped classifying home committee [va'ad bayit] accounts as small business accounts." The bank fee reform was met with fierce opposition from the public, consumer organizations and some Knesset members widely derided for what became labeled "the half-shekel revolution," after Bank of Israel figures revealed that only half a shekel will be the average monthly saving as a result of the reforms. Under the new bank tariffs, which came into effect on July 1, fees and commissions for checking accounts will be cheaper for customers who use direct-banking services, ranging from NIS 1.35 per operation to NIS 2.9, but more expensive for those who make their transactions via teller-assisted services mainly used by the elderly and the poorer sections of the population. Teller-assisted services are charged a fee of between NIS 5.5 per operation to NIS 7. The annual report of 2007 revealed that the country's five largest banks last year generated a record NIS 12 billion from fees charged from the public - a 10 percent increase from the year before. According to the report, the banking supervision department in 2007 dealt with 3,122 complaints by the public and 2,846 requests for clarifications and questions. Out of the registered complaints, about 25% were found to be justified - mainly in the areas of account management, fees, mortgages, credit and cheques. "Over the past year the banks had to pay back a total of NIS 16 million as a result of complaints from the public," said Hizkiyahu. Commenting on the global financial crisis which developed last year, Hizkiyahu said that the exposure of the local banking sector to the US subprime mortgage crisis was insignificant, apart from one bank [Bank Hapoalim], which was forced to write down about $1.2 billion from its portfolio of mostly US mortgage-backed securities. "Although the subprime mortgage crisis is still not over elsewhere, we can now say that for us the issue is over," said Hizkiyahu. "However, looking ahead we need to be prepared and learn the lessons from this crisis - such as better management of risk exposure at a time of a possible downturn in the global economy. The banks need to increase capital and better understand how to manage and control risks." Hizkiyahu added that he had called on banks to raise return on equity to at least 12% annually by the end of 2009 and adopt the Basel II international capital adequacy framework. "Banks can not base their investment decisions solely on credit rating," said Hizkiyahu, referring to one of the lessons to be learnt from the subprime mortgage crisis. "A good credit rating is only one tool for making investment decisions." Finally, Hizkiyahu, a former senior executive at Israel Discount Bank, reiterated his personal view that wages of senior executives in the banking sector are too high in comparison to the average level of wages in the economy. "I said this before, when I was at the bank, and I am saying it now: high salary differentials between a teller and a senior executive are not good from a normative point of view," he said.