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Remarks by the Supervisor of Banks

Supervisor of Banks Daniel Hahiashvili delivered remarks at a conference on financial regulation.  The conference was organized by the Safra Institute for Banking and Financial Intermediation and the Hurvitz Institute for Strategic Management at Tel Aviv University’s Coller School of Management.  In his remarks, the Supervisor presented the main points of the Bank of Israel’s supervisory strategy for the coming years, in accordance with developments in the markets both in Israel and abroad, and based on the Banking Supervision Department’s philosophy.


  • Stability: The Supervisor explained that, “What stands behind the words ‘maintaining the stability of the banking system’ are, first, maintaining the public’s money held in the banking system—the deposits made by each and every one of us; second, ensuring that continuous banking services are available to the public, both in routine and emergency times; and third, the stability of the system protects the banks’ ability to serve as an efficient mechanism for distributing sources of finance to the economy and supporting business and private credit, as happened, for instance, during the COVID-19 crisis. Lastly, stability is the basis for the realization of the Bank of Israel’s monetary policy.”

In this context, the Supervisor emphasized that, “There is no room for a situation in which an entity takes deposits from the public and issues credit from those deposits, but does not operate under a banking license and the appropriate banking regulation, mainly with regard to prudential financial risk management, with an emphasis on liquidity risk and operational risks that may have an impact on its stability.  There is no equal to this in the world, and such a situation may because a slippery slope that puts the stability of the financial system and the public’s money at risk in the event of a crisis.”

  • Fairness: The Supervisor noted that, “We set ourselves the objective of advancing a culture of fairness toward the customers, such that banking services will be provided to all customers, with an emphasis on adapting the banking services to the various population types and characteristics (the elderly, new immigrants, etc.), and on the variety of service and support channels together with a high level of service that will provide a response to customers’ needs and support them so that they can make informed decisions about their finances.  A direct result of fair conduct is that the public’s trust in the banking system is strengthened, and stability is maintained.”

In this context, the Supervisor emphasized that, “The Banking Supervision Department intends to increase consumer-related control, and examine the issue of bank fees in accordance with a multiyear work plan.  In the short-term, the Banking Supervision Department intends to deal with securities portfolio management fees.”

  • Competition: The Supervisor explained what is behind the competition objective, and noted that, “We see tremendous value and importance in increasing competition in the system. A competitive banking system can contribute to the well-being of bank customers, since it can lead to a reduction in the prices of banking services, a wider variety of products and services, positive incentives for innovation and streamlining, increased financial inclusion, improved service to the customer, and even improved customer trust in the system.  We have invested tremendous effect in developing competition in recent years, and we will continue to do so in the coming years.  I believe that we will continue to see the fruits of this in the near future.  However, we must be careful not to fall into the trap where we ignore the advancement of long-term structural measures and begin to deal with individual issues from the perspective of unsolvable market failures, mainly with regard to intervention in pricing.”

In this context, the Supervisor noted that, “The Banking Supervision Department intends to encourage the entry of nonbank entities, including credit card companies, to the banking field, by creating a scale of banking licenses that will be adjusted to the desired activity and the risk level in the activity of the entity requesting the license.

  • In addition, the Supervisor emphasized the ecosystem effects on formulating the supervisory strategy, particularly the effect of expected technological changes, with an emphasis on blockchain, cloud, and artificial intelligence technologies, and even quantum computing. In this context, the Supervisor emphasized that, “The great technological jump is still before us.  Whether through artificial intelligence technology, which is making significant jumps each month, or through quantum computing, which increases computing power exponentially, I have no doubt that technology will continue impacting the way in which we consumer our financial services.  As regulators and as a financial system, we must be prepared for this, both on the side of the opportunities that developing technology brings with it to the financial world, and with regard to a responsible approach that we must adopt in parallel, from the standpoint of risk management and consumer protection.”