The Supervisor of Banks at the Bank of Israel, Dr. Hedva Ber, today submitted to the Knesset’s Economic Affairs Committee the semiannual report on fees paid by households for common banking services. Click here for a link to the report. In parallel, the Banking Supervision Department distributed to all the banking corporations a list of steps that it plans to take regarding fees in various areas: the tracks service, handling atypical fees, and commissions for buying, selling and redeeming Israeli stocks and bonds. All the steps will be anchored in the legislation required to bring them into effect.
The Supervisor of Banks said, “The report that we are presenting today indicates that the cost to households of basic and common services is less than NIS 15 per account, on average, and has been on a declining trend in recent years. A customer carrying out more complex banking transactions, such as those involving securities or foreign currency, pays a higher amount. Several atypical fees have been dealt with by the Banking Supervision Department in recent years, through imposing supervision on the price or by cancelling the fee. With that, we are of the opinion that the handling of atypical fees that remain should be completed, the number of customers joining the fee-tracks service—which makes it possible to reduce the price of banking service—should be expanded, and that securities transaction fees should be regulated. The material we distributed to banks today outlines additional steps in these areas, which are added to our main initiatives to promote competition, technology, and increased efficiency at the banks, which together will reduce even further the cost to households of banking services and will improve the product
In addition, it is important to me for the public to be aware of the many tools that can be used to reduce the fees they pay:
·         Switching to direct banking—via the Internet, digital, or automated devices—which is markedly cheaper than activity in a branch;
·         Joining the fee-tracks service, which can save money for both households and small businesses;
·         Comparing banks—there are wide differences in prices.
I call on households to conduct their banking in an informed and active manner, and thus save on expenses.”
Adding senior-citizens and customers with disabilities to the basic fee track
The fee tracks service enables households and small businesses to simply and inexpensively manage the costs of a current account. However, the share of customers that joined the tracks service still remains low, despite personal letters sent by banks to their customers and a public awareness program conducted by the Banking Supervision Department, intended to call customers’ attention to their ability to profit from switching to tracks.
In accordance with a draft revision to the fees rules distributed today to banking corporations, they will be required to review all accounts belonging to senior citizens and customers with disabilities, to identify those for which joining the fee tracks service pays, from the customer’s perspective, and to switch them to the basic track so that it will be the default option, though sending notification of this in advance. The intention of the Banking Supervision Department is for the process to help customers who are less mobile and active.
Reducing atypical fees
Despite the average cost for a customer’s current account in respect of common banking activities being lower than NIS 15 per month, as noted, there are still fees in the system that are out of line in terms of their amount, and at times also in terms of the cost of producing that banking service. Against this background, the Banking Supervision Department notified the banking corporations that in 2016 it intends to review the fee schedules in respect of banking services to households and small businesses, with the goal of detecting and dealing with these fees. Specific guidelines will be provided to the banking corporations in accordance with the findings of the review. The Banking Supervision Department recommended that banks act preemptively and review their fees, and reduce the atypical fees that will be detected by them.
Even before the extensive review, the following fees will be discussed:
Fee in respect of “issuing reports at the customer’s request—standard reports”: The range of fees in respect of this service is currently NIS 13-55. In accordance with the draft Supervision Order submitted to the banking corporations, the intention is place the fee under supervision and to limit it to not more than NIS 15.
Fee in respect of changing the repayment date for a housing loan: The fee is set in the Banking (Service to Customer) Law, and based on the provisions of the law the tariff for this service is currently NIS 125. In accordance with the draft revision to the fees rules, the fee will be reduced to the price of one teller-executed transaction (about NIS 6.5). The Banking Supervision Department emphasizes that in order to do this it will work together with MK Israel Eichler, who initiated a bill on the issue, to amend the Banking (Service to Customer) Law so that the section in the law that sets the fee will be deleted.
Reducing commissions for buying, selling, or redeeming Israeli stocks and bonds
The area of securities is a very competitive area, with many nonbank participants, and customers have a wide range of options outside the banking system as well. However, among banks there is a gap between the commission listed in the fee schedule and the commission actually charged. Thus, the commission listed in the fee schedule for buying, selling, or redeeming securities at the five largest banks currently ranges from 0.54–0.65 percent of the transaction value, and the commission actually charged for such activities is notably lower. In the Banking Supervision Department’s assessment, the gap between the actual price and the fee-schedule price adversely impacts on transparency to the customer, and as a direct result on competitiveness in this area as well. In view of this, the Banking Supervision Department issued a draft Supervision Order to banking corporations, according to which the rate for the commission according to the fee schedule is not to exceed 0.4 percent.