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The Supervisor of Banks, Mr. David Zaken, presented a banking draft directive to the Knesset Economics Committee today outlining the banks’ reporting duties to their customers by means of a uniform and clear periodic report, which will present the customer’s assets and liabilities, income and expenses, and credit rating.
The annual report, which the banks will be required to provide to their customers once a year, has two main goals:


1.    Increasing transparency to the retail customer (households and small businesses); and
2.    Expanding the supply and improving the terms of credit, inter alia by way of reducing the knowledge gap between customers and the banks, and between the banks and competing entities.




The Supervisor of Banks noted that the information that will be presented in a centralized way to the banks’ customers in the annual report will enable the customer to obtain full and comprehensive information about his activities from the standpoint of assets, liabilities, commission fees and interest payments he makes, as well as the interest rate he gets on deposits, and reinforce his ability to compare between various different banking services and products.




In regard to the credit rating that will be part of the report, the Supervisor of Banks noted that “disclosure of the credit rating will enable the customer to better track his banking and financial behavior, and allow him to obtain competing bids from other lenders.  The rating will also enable the entry of new players such as banks and non-bank credit providers to the system, and will increase the supply of credit to the retail sector. Moreover, this step is essential for the success of various initiatives currently underway to establish entities such as credit unions, an Internet bank, and more. As of today, these entities do not have the ability to obtain information about the credit history and financial behavior of the new customers they are trying to recruit.”


The Supervisor of Banks noted that, in parallel with this step, complementary steps are being considered to prevent the misuse of information and to assist in the success of this measure.  These include legislative amendments that will ensure the protection of information, including a clear definition of who is permitted to use the information and the purposes for which it can be used; setting out sanctions to prevent the misuse of information, and defining how information confidentiality is to be maintained.  In addition, the Supervisor of Banks intends to prepare a consumer guide that will be published on the Bank of Israel’s website, which will make it easier for the public to make intelligent use of the report. The Banking Supervision Department is also acting to reinforce control over the banks’ internal rating system, the ratings from which are what affect the banking ID card.  It is important to understand that these are dynamic models that take into account new information that accumulates about the customer, and should the customer improve his financial behavior, this will be reflected in an improvement in his credit rating.
In conclusion, the Supervisor of Banks said that he attributes great importance to transparency of information and removing impediments, beyond the need for reinforcing competition over banking services to households and small businesses, and this is an important step in this direction.