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Further to previous measures advanced by the Bank of Israel on the matter, the Banking Supervision Department has published two new draft directives for public comments. These are intended to continue encouraging competition in the field of deposits, and to improve value offers received by customers.
Supervisor of Banks Daniel Hahiashvili said: “The Banking Supervision Department is advancing another measure to increase transparency in the field of deposits, so that customers will have clarity with regard to the interest they will receive on deposits and be able to compare between the different banks. In parallel, we are improving the banks’ abilities to raise deposits from the public, through a shortened customer identification process. These measures are expected to increase competition in the field of deposits, and to enable bank customers to obtain the optimal offer for them.”
Details on the measures:
- The first draft is a revision to Directive number 417 “Activity of a Banking Corporation in a Closed System”. The closed system makes it easier to make a deposit at a banking corporation where the customer does not maintain current banking activity. The revision to the directive is intended to improve the closed system and to encourage banking corporations to make greater use of it.
As part of the revision to the directive, the barrier requiring the bank to return money to the original account at the end of the period has been removed, and at the customer’s request, the bank may now leave the money in place so that it can be deposited for an additional period. Additional adaptations were made that are intended to update the directive’s requirements and streamline work processes to find a customer in a case where the money cannot be returned. This is in order to make it easier for banking corporations that would be interested in using the system in the future.
- The second draft is a new directive on “Publishing interest rates on deposits and on positive account balances”, and includes guidelines for the banking system with regard to presenting information on deposits and on positive account balances. This draft directive sets out rules and a uniform structure for presenting the information to the public, while increasing transparency and simplifying the publication of interest rates on deposits and on positive account balances in a way that will help customers compare the variety of value offers made by the various banks in this field. This will improve the effectiveness and usefulness of presenting the information, which will encourage competition in the field of deposits.
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In accordance with the directive, banking corporations will display collected information on the interest rates on common types of deposit that will be set out in the directive. If the banking corporation offers additional deposits, these will be presented separately. In addition, the directive sets out various guidelines for the uniform presentation of the information. For instance, it should be noted that the information is prior to the calculation of capital gains tax, rules are set out for the manner in which variable interest rates are presented, and so forth. Furthermore, the directive sets out that, as part of the publication, the banking corporations must show a link to the comparative information tool for interest rates on deposits that appears on the Bank of Israel website, in order to help the public more easily compare the interest rates on deposits offered by the banking corporations. (An example of the information presentation is available in the draft directive – in Hebrew).
Finally, the directive sets out an obligation to offer customers a search function that will enable them to obtain targeted information that answers their needs with regard to the types of deposit that are offered. This is based on the concept that while many customers and entities that offer price comparison services may generate benefit from the publication of the collected information, there are many other customers who need a tool to make the information accessible for them and help them adjust the product to meet their needs. The Bank of Israel has established a dedicated environment to compare interest rates on deposits and credit, and invites the public to use it in order to reach relevant financial decisions.