'Internet bank, credit unions will help expand competition'

Zaken C'tee proposes steps to increase competition in banking sector which suffers from high level of concentration that inhibits competitiveness.

July 16, 2012 22:23
2 minute read.
Yuval Steinitz and Stanley Fischer

Steinitz and Stanley Fischer 370. (photo credit: Courtesy)


Dear Reader,
As you can imagine, more people are reading The Jerusalem Post than ever before. Nevertheless, traditional business models are no longer sustainable and high-quality publications, like ours, are being forced to look for new ways to keep going. Unlike many other news organizations, we have not put up a paywall. We want to keep our journalism open and accessible and be able to keep providing you with news and analyses from the frontlines of Israel, the Middle East and the Jewish World.

As one of our loyal readers, we ask you to be our partner.

For $5 a month you will receive access to the following:

  • A user experience almost completely free of ads
  • Access to our Premium Section
  • Content from the award-winning Jerusalem Report and our monthly magazine to learn Hebrew - Ivrit
  • A brand new ePaper featuring the daily newspaper as it appears in print in Israel

Help us grow and continue telling Israel’s story to the world.

Thank you,

Ronit Hasin-Hochman, CEO, Jerusalem Post Group
Yaakov Katz, Editor-in-Chief


The Zaken Committee proposed a series of measures to increase competition in the banking sector Monday, including encouraging the creation of an Internet bank and credit unions.

Israel’s banking system suffers from a high level of concentration that inhibits competitiveness, a low level of profitability by international standards, and a low level of operation efficiency relative to banks in developed countries, the committee concluded in its preliminary report. It said this last point was partially due to high wage costs relative to the banks’ scale of activity.

Be the first to know - Join our Facebook page.

Bank of Israel Governor Stanley Fischer and Finance Minister Yuval Steinitz established the committee eight months ago, appointing Banks Supervisor David Zaken as chairman.

They tasked it with recommending measures to increase competition in the banking-services market, improve household and small business bargaining power, expand customer options, improve the level of services and reduce its cost.

The report proposed a number of structural measures whose goal is to increase the number of players in the industry, including encouraging the creation of an Internet bank or credit union, which it said would “increase competition in the retail segments of the banking system” in the medium-to-long term.

It said the central bank’s Banking Supervision Department should help entrepreneurs to create such institutions by amending regulations and providing appropriate guidance and direction.

Institutional investors, including insurance companies, pension funds and provident funds, should also be encouraged to enhance competition in certain segments of activity in the banking system, but face barriers that prevent expansion or entry into the retail credit market, the report concluded.


It recommended examining the mechanism for channeling long-term public savings to the provision of credit to households and small businesses.

The report also presented a series of measures that it said would increase competition between existing players, reduce information barriers and enhance transparency and fairness. It proposed creating the option of opening accounts through the Internet, making it easier and simpler to close accounts, and publishing the banks’ actual interest rates for purpose of comparison.

It proposed issuing banking identity cards in a uniform format, which will provide a full and accurate picture of a customer’s assets’ liabilities, yield and bank fees. It said this would increase the customer’s ability to manage their financial affairs wisely, and would make it easier to compare their bank with rivals.

Regulatory intervention was covered in detail in the report, with the team formulating recommendations for the control or cancelation of a number of existing banking fees. These measures will not necessarily lead to increased competition, the report said, but will hopefully eliminate market failures that could occur as a result of the existing structure.

The report devoted an extra chapter to small businesses, in the belief that this sector deserves at least as much attention as households. It found that the volume of credit to this segment is small relative to its contribution to business output, but that bank-financing margins are relatively higher for small businesses.

It proposed a number of measures specifically aimed at small businesses, including reducing bank fees, facilitating the early redemption of business credit, creating a database to analyze their standing, and increasing the scope of reporting on provision of credit to this sector.

Join Jerusalem Post Premium Plus now for just $5 and upgrade your experience with an ads-free website and exclusive content. Click here>>

Related Content

The Teva Pharmaceutical Industries
April 30, 2015
Teva doubles down on Mylan, despite rejection