I am pleased to have the opportunity to stand here today and announce to the public three further initiatives that are taking shape, and that will lead to improved competition in the financial system in Israel. I am also pleased that we, the Bank of Israel and the Ministry of Finance, are taking these steps together. As I have noted numerous times in the past, structural reforms in the financial field that are made together and by agreement by the Bank of Israel and the Ministry of Finance have better chances of success and implementation. As such, I welcome this.
- Establishing a computerized banking services office will lower the entry barriers being faced by new players.
- Establishing an information sharing platform, API, among the banks, as well as access for third parties acting on behalf of the customer, will increase the flow of information within the financial system.
- And the third step, in contrast with the first two, was not part of the Shtrum Committee recommendations—the establishment of a system for account mobility, which will make it possible for bank customers to move more securely and easily from one bank to another, thereby contributing directly to competition between the banks over the quality and price of the services they provide.
These are significant infrastructural measures, and after they are implemented, they will lead to a significant change in the extent of competition in the financial system. But these are not the only measures. There are many others that the Bank of Israel is advancing, some with the Ministry of Finance, and some as part of the Shtrum Committee recommendations.
Among them:
- We are acting to regulate the credit card activity market, and guiding the separation of the credit card companies from the banks. At the outset of the process, corporate governance at the credit card companies was regulated in order to prepare them for the expected separation from the banks. In addition, we are in the final stages of formulating various topics that will regulate the market and the relationships between the banks and the credit card companies. Among these, are setting cross-over fees, reducing the regulatory burden on the credit card companies, regulating the activities of credit unions, and publishing rules for guest acquirers. By the way, a license was issued not long ago to a new acquirer by the Banking Supervision Department.
- Many steps have been taken in the field of payment systems. Among them, the publication of terms of access to the payment systems, regulating the openness and access for all relevant parties in the debit card chain (the “Ashrait” protocol), advancing the implementation of the EMV standard for debti cards, electronic clearance of checks, regulation of payment services based on international regulations.
- The Banking Supervision Department published a draft directive that will come into force in the next few days, which will enable the opening of a bank account online, including a first account. In general, the Banking Supervision Department supports the advancement of many measures in the area of banking technology that improve the level of service for the Israeli customer and lower customer costs. Technological developments are already reflected in the offer of new and advanced services to new customers, such as no-cost mobile payment applications, and more.
- The Banking Supervision Department is pushing the banks to significantly streamline, and is acting to “roll over” the greater efficiency to bank customers, through the lowering of fees, and innovative and convenient services for the public.
- The Banking Supervision Department is also expected to shortly publish a final outline for the establishment of entirely new banks (a draft on the issue has already been published). The intention is to deal with existing barriers to the establishment of a new bank, and to provide incentives to go in this direction. Thus, the capital requirements from new banks will be lower than what has so far been customary; new, as well as existing, banks will be able to operate without an independent computer system, but through an outsourced joint computer and operations infrastructure; and leniencies in other regulatory requirements will be examined.
All of the measures I have outlined would not have been possible had the Banking Supervision Department not taken it upon itself top promote competition in the banking system. This is not just a slogan. The Banking Supervision Department is working nonstop in considering and implementing measures that will improve the level of competition in the system and the service provided to consumers, alongside its traditional function in maintaining the stability of the banking system.
Permit me to mention another significant infrastructural initiative, which completes the picture of the financial system—the establishment of the central credit register. The Bank of Israel is acting concertedly as we speak, under challenging schedules, so that at the beginning of 2019, a central credit register will be available to consumers and financial players. Such a register will provide broad information on the customer’s exposure to credit, and is expected to narrow the information gaps between the bank and the customer and between the bank and competitors. Basically, power is moving to the customer, while the various financial entities compete among themselves over the terms of credit that will be offered to the customer.
In summation, the many steps we are taking will lead to a significant change in the extent of competition in the financial system. I have spoken about this with the Minister of Finance, and I have emphasized to him the importance of proper implementation of the reforms, and the need to give them time so that they are fully implemented and effective. These are large infrastructural changes that take time, and we must also allow the system to get acclimate to them, and to reach the new equilibrium that will be created as a result of these changes and reforms.
Thank you.