Central bank defends bank-fee reform

Cost of bank services rose 16.2 percent in July despite intention to lower fees.

Supervisor of Banks Rony Hizkiyahu on Sunday defended the controversial bank-fee reform after the consumer price index for July showed a rise in the cost of banking services. "Preliminary research conducted by the Banking Supervision Department shows that basic banking services fees, including management fees of checking accounts, have come down as a result of the bank-fee reform that came into effect at the beginning of July," the Bank of Israel's Banking Supervision Department said in a statement Sunday. The bank-fee reform, which came into effect on July 1, was supposed to bring down fees. However, the consumer price index published Friday 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. Despite this increase, and the public and media attention it is receiving, the rise was a negligible factor in the 1.1% jump in July's CPI, the Banking Supervision Department said. Bank fees account for 0.05% of the monthly inflation rate, it said. The bank-fee 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 per operation to NIS 2.9. But they are more expensive for those who make their transactions via teller-assisted services, which are mainly used by the elderly and the poorer sections of the population. Teller-assisted services are charged between NIS 5.5 and NIS 7. 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 trend to lower fees due to stronger competition among the banks. In addition, the department said, the CBS based its figures on the banks' feetariff schedule, but many customers are not paying the full rates, which is not reflected in the CBS calculation.