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(photo credit: Ariel Jerozolimski)
Bank of Israel Governor Stanley Fischer on Monday urged Knesset members to push forward with government-sponsored legislation on the supervision of banking fees but stressed that regulation should only be conducted by "appropriate" regulatory committees.
"Regulating prices, in this case banking fees, is generally not the ideal method (to achieve a higher level of competitiveness) and we would prefer not to have to take this path. However, as competition in the banking system - and in particular in the household sector - is low, and that it could take some time before our efforts to increase competition bring results, then we have drafted legislation that would grant the Supervisor of Banks the authority to regulate banking fees," said Fischer in a speech at Monday's meeting of the Knesset inquiry committee on bank fees.
Bank representatives however, rejected the notion that legislation was necessary and said the banks were capable of governing themselves.
Fischer explained to the committee that the reason for the low level of competition in Israel's banking sector was that a limited number of banks capture the entire market, making it very difficult for smaller banks to expand their customer base and almost impossible for foreign banks to break into the household sector.
"The local banks have a widespread branch network and they offer financial services based on advanced technological systems. This places a high barrier to entry to any potential newcomer in the market, whether local or foreign," said Fischer.
In addition to the introduction of foreign banks into the Israeli household sector banking market, Fischer said the central bank was "examining the possibilities of bringing a new type of player into the banking market, for example, an Internet bank, or converting the Postal bank into a true bank."
The legislative bill that the Bank of Israel has drafted, Fischer noted, will allow the Supervisor of Banks to regulate those fees that reflect an uncompetitive price, as well as allow for a reduction in the number of banking fees and to create a closer connection between the fees and the services offered.
"This bill is currently in discussion in the inter-ministerial committee on legislative matters and I hope that the bill will shortly be presented before the Knesset," he said.
While Knesset members in attendance at Monday's meeting supported Fischer's decision, bank representatives bristled at his proposition.
"I applaud the work being done by the bank fee inquiry committee, however the level of fees that customers are actually charged is very low - less than NIS 40 per month on average - and therefore there is no need for any legislation," said Tzvi Ziv, director-general of Bank Hapoalim.
Moshe Pearl, director-general of the Banks Association of Israel, agreed with Ziv, noting that monthly bank fees of NIS 37 were very low and compare favorably to other countries around the world, including the US.
"What began with a sense of the banks stealing from the public has turned out not to be true - we have provided a list of our fees as per the request of the committee," he added.
The bank fee committee, chaired by MK Moshe Kahlon and under the jurisdiction of the Knesset Economic Action Committee, was formed more than three months ago to investigate the banks' fee structure.
Kahlon told The Jerusalem Post on Monday that the committee hopes to come to a resolution on new fee standards by next week.