2013 Competitiveness.doc2013 This press release as a Word file

The Team to Examine Increasing Competitiveness in the Banking System publishes a Summary Report including its final recommendations

The aim is to bolster competition and increase the consumer power of households and small businesses



The Team to Examine Increasing Competitiveness in the Banking System, which was appointed by the Minister of Finance and the Governor of the Bank of Israel, is today publishing a summary report including its recommendations for increasing competitiveness in the banking system. This report is a continuation of the Interim Report published on July 16, 2012.

The team, led by Supervisor of Banks David Zaken, included: Odeda Perez—Deputy Supervisor of Banks at the Bank of Israel; Dr. Shlomi Prizat—Chief Economist at the Anti-Trust Authority; Eyal Epstein—Deputy Budget Director at the Ministry of Finance; Roni Neuber—Supervisor, Department of Counsel and Legislation at the Ministry of Justice; Maurice Dorfman—Deputy Head of the National Economic Council; and Gil Cohen—Director of Government Debt at the Ministry of Finance.
The team found that the banks' retail activity sectors—households and small businesses—tend to lack any competitive threat from outside the banking system. Therefore, and in light of the characteristics of the banking sector – concentration and transition barriers, there is concern that the level of competition in these sectors is low. As such, due to retail customers' dependence on the banking system, the team focused its work on promoting competition in the fields of savings services, credit and the payment system for these sectors, both within and outside the banking system.
With the publication of the interim report the team approached the public to hear its opinions regarding the interim report recommendations. Experts and entrepreneurs from the field of finance, investment houses and banks responded to the interim report. After hearing the public's opinion, and after conducting an international comparison of the cost of managing a current account, the team decided to leave in place the recommendations it made in the interim report. Those recommendations can be divided into three areas of activity: (1) steps to increase the number of players in the sector; (2) steps to increase competition among the existing players; and (3) complementary steps including regulatory involvement in order to provide a solution for market failures. Within this framework, the team also focused specifically on the small business sector.
In addition, the team decided to recommend further steps which were seen as being significant to increasing competition and to strengthening the negotiating power of households and small businesses. These steps include:
(1)   Increasing competition in the provision of credit to households and small businesses by non-bank institutions – A team was established, led by the Commissioner of Capital Markets, Insurance and Savings at the Ministry of Finance, to formulate the steps for making retail credit available from pension savings sources and removing the regulatory impediments that currently exist. The team intends to complete its work by the end of this year.
(2)   Removing a main impediment to moving from one bank to another by improving and streamlining the process of moving direct debits ("Standing Bank Orders") from the old bank to the new one in a way that will not require the customer's involvement in the process beyond submitting the request to the new bank.
(3)   Lowering the cost of maintaining an account for small businesses – The community of small businesses that would enjoy retail fee rates for managing their accounts has been defined and expanded, and the text of a legislative amendment for implementing the recommendation has been formulated accordingly.
Supervisor of Banks David Zaken: "We are committed to increasing competition in the banking system and to strengthening the power of households and small businesses. The report's recommendations provide the infrastructure and an opportunity for a significant and effective change. The full implementation of the team's recommendations as a complete package will lead to increased competition in the banking services provided to households and small businesses—in terms of the price they pay for the service they receive, in terms of the total available credit in the market, and in terms of the quality of the service.
"The report lays out goals, principles and desired arrangements and, more importantly, ways and timetables for implementation. Since the publication of the Interim Report, and after hearing the opinions of the public, we have begun implementing the recommendations, particularly those within the Bank of Israel's jurisdiction, including recommendations regarding the supervision of bank fees."