Banking Supervision Department conference: "Competition in the Financial System"
Bank of Israel Governor Prof. Amir Yaron opened the conference. The following are selected quotes from his remarks:
- "Some of the significant measures and reforms aimed at enhancing competition have already come to fruition, and others are in the process of coming to fruition. There are additional supporting processes that are required now, such as the development and application of financial and technological instruments, and the deepening of the capital market, which will contribute to competition in the credit market and increased consumer well-being as they advance."
- "These processes are becoming possible mainly in view of the development and application of advanced technologies that were not available until just recently."
- "Removing information gaps, leveraging existing information, and utilizing technological ability for informed analysis and learning in real time about the credit market will enable more correct pricing that is more in line with the risk to various layers of the credit market—households and small and medium businesses—thereby contributing to development of the market."
- The market must be developed while managing risks and developing proper regulation, in order to make sure that, despite the risks, the benefits from these processes will make them worthwhile."
- Two financial instruments that should be advanced in order to make the capital market more sophisticated and deeper, and which will contribute to the continuing increase in competition, are securitization and long-term interest rate derivatives."
The Supervisor of Banks reviewed all of the measures taken in recent years by the Bank of Israel in conjunction with the Ministry of Finance and other regulators, with the aim of making the banking market more competitive for households and small businesses. Alongside these measures, the Supervisor also discussed the challenges in a changing competitive environment, and presented examples. She then presented the actual changes that are already taking place in the banking fields, which the public is already seeing and feeling, such as new payment applications, a decline in settlement fees for small businesses, fintech companies that make it possible for customers to compare costs, the technological innovation created in a variety of banking products and services, competition of the type and level of services, and more.
"Today, we can already say that we feel a change in banking competition. Both the public and the banks and credit card companies are saying this clearly in surveys that were recently conducted. The change is based on a great number of large structural projects, and significant and deep regulatory directives that we have advanced in recent years with the aim of increasing competition in banking for households and small businesses. The main measures include the separation of the credit card companies from the banks, the establishment of the credit data sharing system, lowering the capital and regulatory requirements for new banks, encouragement of the establishment of a computer services center for both new and existing banks, publication of regulations that encourage innovation, and more. Each of the changes is significant, and also complex, but all of them taken together create a different "playing field" for the banks. The Banking Supervision Department will continue to work vigorously to advance all of these significant projects that, together, create a competition highway. The public will continue to enjoy the benefits of competition, which are gradually coming to fruition."
Ms. Tal Harel Matityahu, Chief of Staff to the Supervisor of Banks and head of the Strategy and Special Projects Unit, spoke about "Competition, Service, and What is Between Them", during which she said that the satisfaction survey conducted by the Banking Supervision Department in 2018, and the publication of its results, were a call to action to the banks, and have already led to change in a variety of areas in the field of banking service, both in creating new processes to improve service by the banking system, and in accelerating processes that were already in advanced stages.
In addition to conducting another satisfaction survey among households in 2019, with the aim of monitoring the changes in the public's perceptions of service as a result of these processes, Harel Matityahu said that the Banking Supervision Department intends to conduct a survey presenting the satisfaction of small businesses with the banks where they manage their accounts, and to publish the findings to the broad public.
Mr. Tzuriel Tamam, the Bank of Israel's Supervisor of Credit Data Sharing, presented the credit data system and its expected effect on the credit market. He noted in his lecture that within a short time, once the various participants have completed their preparations for working with the new system and dealing with the various challenges in implementing and using it, the credit data system will significantly change the ruls of the game in the retail credit market, and will increase competition in the credit field both within the banking system and on the part of nonbank participants. The system will enable customers to obtain more worthwhile value offers, to manage their moves in a more informed way, and to increase their bargaining power with lenders when they need to take out credit.
Other participants in the conference included:
Mr. Daniel Zilberman, member of the management of Warburg Pincus, who spoke about the day after the separation of the credit card companies that was completed as part of the reform to advance competition, with the aim of creating two new independent companies that would compete over households and small businesses.
Ms. Lilach Asher Topilski, CEO of Discount Group, who spoke about competition in an era of change from the Discount Group's point of view, and reviewed the changes in consumption patterns that are affecting the banking industry and dictating new rules of competition.
Mr. Yuval Tal, Founder and President of Payoneer, spoke about the increasing competition in the payments field, and discussed the advantages of bringing new participants into the market, such as the banks' money transfer applications.
Mr. Daniel Globerson, Head of the API division at the Royal Bank of Scotland, spoke about the effect of "Open Banking" on competition in the financial system in the UK. The Bank of Israel is leading an open banking project in Israel, and the experience from its implementation in the UK is important.
m, CEO of the Israel Institute of Economic Planning and Chairman of the Committee to Increase Competition in Financial Services, spoke about the lessons and challenges of the Committee's work.
The final speech at the conference was by Mr. Yogev Gardos, Deputy Supervisor of the Ministry of Finance Budget Department. He spoke about "Competition in banking – removing the computerization barrier for new banks". Gardos presented the work of the Bank of Israel and the Ministry of Finance in removing various barriers that lowered the level of competition in the banking system, including one of the most significant barriers to the entry of new participants into the banking system—computerization. He outlined the tender that was held for a service center, in which the TCS company (a subsidiary of the Indian "Tata" corporation) was chosen as the winning supplier for establishing banking computer services. The company has already signed an agreement to provide computer services to the "Marius Nacht" Group, which is working to establish a new bank, and to the "Ofek" group, which will be establishing a credit union.