Karnit Flug at her office on February 3, 2015.
(photo credit: MARC ISRAEL SELLEM)
The Bank of Israel on Sunday introduced a tool it’s calling “banking ID cards,” as the latest in a series of measures aimed at boosting transparency and increasing competition in the banking sector.
The ID cards will be standardized, easy-to-read annual reports from banks that help people understand their assets, liabilities and costs in simple, everyday terms. Banks will be required to send them out each February 28. They will also be obliged to provide the details on demand, as well as in a longer, more thorough version.
The idea behind the ID cards is two-fold.
First, they are expected to help customers get a better understanding of their financial situation by seeing how all the various fees and fines the bank charges in a year add up, for example.
Second, they are expected to make it easier to compare a customer’s banking terms with offers from other institutions.
Because all the banks will have to use the same format, the theory goes, it should be easy to compare competing offers side-by-side.
“The new report, which is written in a simple language and in a format that is identical among all the banks, will help every customer – household or small business – to understand his overall financial situation, to see how much he is paying in fees and interest during the year for all activity in the bank account, and to improve the conditions of his account,” said BoI Supervisor of Banks Dr. Hedva Ber.
While BoI Gov. Karnit Flug and Finance Minister Moshe Kahlon agree that the banking sector is too concentrated, they have disagreed over certain reform measures, including who will supervise credit-card companies when they are split off from the banks. Flug has insisted that the central bank retain regulatory oversight over credit- card companies to ensure that reforms don’t endanger the country’s financial sector.
“The fact that in Israel we did not have to save any of the banks helped us emerge from the global crisis with less damage to growth, employment and quality of life,” Flug pointed out in a speech on Thursday, alluding to Israel’s relatively strong weathering of the global financial crisis that began in 2008.
Too much competition without regulatory oversight, she argued, could lead to instability.
Kahlon shot back in an interview with Ynet on Sunday, saying of Flug’s position on his reforms: “She may be against it, she may want to help the banks, I have nothing personal against the governor, my problem is with a financial sector that’s a cartel, that has no competition.”
He planned to do his best to sidestep Flug, he said.
“She can like it or not like it, but this is what we’re doing.”
Tensions between the two were sparked by differences over the recommendations of the Strum Committee, headed by former antitrust commissioner Dror Strum, which was tasked with finding ways to increase competition to make credit cheaper for consumers.
The centerpiece of the committee’s recommendations was separating the credit-card companies from the banks.