Minister of Finance Bezalel Smotrich and Bank of Israel Governor Prof. Amir Yaron have announced a new measure in their struggle against concentration in the banking sector. They have set up an inter-ministerial team, which will focus on strengthening competition in the banking and credit sector for small businesses and households.
The team, which will be headed by the Supervisor of Banks and the Ministry of Finance Budget Commissioner, aims to "Remove obstacles preventing the entrance of new players into the market and bring about the development of additional activities by existing players."
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The new team will need to work quickly. The Ministry of Finance and Bank of Israel have instructed that the team’s report on recommendations must be submitted by April 2025.
One of the main aims set for the team is to design a framework for tiered banking licenses, which would allow non-bank entities to offer deposits and provide credit. The Ministry of Finance and the Bank of Israel believe the move "Will bring about a fundamental change in the financial market, expand consumer choice and lower financing costs for households and small businesses."
"A defining moment"
The establishment of the team comes after the Bank of Israel Governor's harsh criticism of the financial system last week. Yaron said, "The banking system is characterized by insufficient competition. The high profitability of banks in Israel relies largely on the huge current account balances that the public holds in their accounts, which constitute a cheap source of funding for the banks." According to him, the banks, for their part, do not provide a decent return to customers.
Smotrich said that the establishment of the team is "a defining moment in the struggle to lower the cost of living. Opening the deposit market will inevitably lead to competition for credit and will be a historic step that will improve the wellbeing of Israeli citizens. We are determined to create a diverse, competitive and accessible credit market, which will save Israeli citizens thousands of shekels and strengthen the entire economy."
Yaron added, "The best way to promote competition is to remove barriers that prevent new players from entering the financial system and the development of new activities."
Published by Globes, Israel business news – en.globes.co.il – on December 2, 2024.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.
