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The Bank of Israel publishes today an amendment to the Banking Regulations regarding fees, through which securities deposit management fees for makam and money market funds will be cancelled, limitations placed on bank fees for securities-related activities, and additional fees for households and small businesses will be cancelled. The amendment will come into effect at the beginning of the year (January 1, 2013).
The steps are intended to increase the competition for households' short term savings; to improve households' ability to compare securities activities; to increase fairness, and to grant bank customers more extensive and more accessible information regarding fees they are charged.
A first and wide-ranging step in the implementation of the recommendations of the Team to Examine Increasing Competitiveness in the Banking System was formally taken today with the publishing of an amendment to the Banking Regulations (Service to Customer) (Fees), 5768–2008 (hereinafter, "the Regulations").
In addition, the Supervisor of Banks directed the banking system to reprice the fees charged for securities activities, in order to bring them in line with the actual amounts charged, to the extent possible.
Supervisor of Banks David Zaken said, "After in-depth examination of the competitive barriers in the banking system, and the relationships between banks and their customers, and after formulating recommendations in the matter, we decided to take steps which will lead to improving the position of households and small businesses. The Banking Supervision Department will continue to act to provide bank customers with tools to improve the ability to compare various banking services and products, to reduce the information gaps between banks and their customers, to offer more varied options to choose between, to ease the transfer from one bank to another, and to strengthen the negotiating position of customers vis-à-vis the banks."
The Banking Supervision Department emphasizes that while the amendment itself refers to fees, it can also lead to changes in customer conduct and trends in the sector.
The main fees which have been cancelled or changed as part of the amendment to the Regulations, and within the framework of related guidelines to the banking system, and the rationale behind the changes:
1. The step: Cancellation of securities deposit management fees for makam (bills) and money market funds
The goal: Increased competition over households' savings, increased ability to compare and choose between different savings options
Investment in short term shekel deposits (up to 1 year) is the most common short term investment vehicle for households. Regarding deposits, there are claims of little competition, which results in low interest rates offered to customers.
Purchasing makam and investing in money market funds on the Tel Aviv Stock Exchange (TASE) are savings vehicles which serve as alternatives to depositing funds in a shekel deposit, but while depositing funds in a shekel deposit does not incur a fee, buying—and holding—makam, as well as investing in a money market fund, do incur various fees, such as purchase fee, sale and maturity fee, and management fees for holding securities.
As makam and money market funds are alternative investment vehicles to shekel deposits, it was decided to prohibit banks from charging securities deposit management fees for makam and money market funds.
2. The steps:
i. Differential pricing of various securities activities, depending on how they are carried out
ii. Requiring banks to set maximum charges for the purchase and sale of securities
iii. Cancelling minimum management fees for securities deposit management
iv. Expanding supervision over securities account transfer fees to the transfer of a customer's account out of the banking system as well
The goal: Reducing the cost of customer-executed purchases and sales, and simplifying the fee structure for securities-related activities. This will lead to improved information held by customers with regard to the price they pay, and increase the system's efficiency in this area of activity. Likewise, expanding the supervision over securities deposit transfer fees to the transfer of an account out of the banking system as well will make it easier for customers to transfer between the banking system and non-banking system, and contribute to increasing the competitive threat.
3. The step: Requiring banks to reprice fees for securities activities
The goal: Adjusting the advertised fees, to the extent possible, to the price actually charged. Likewise, adjusting the fees to changes in the fee structure for securities-related activities, in accordance with the new fee schedule.
4. The step: Cancel/change other fees
· Cancel the fee for an information card and cash withdrawal card—the issuance of the means to retrieve basic information and the ability to withdraw cash from an automated machine is part of the service provided for the account management fee, so a separate fee should not be charged
· Handling fee for credit and guarantees—increasing the exemption from a maximum of NIS 50,000 to a maximum of NIS 100,000 for non-housing loans, in order to increase the ability to compare credit granted to households and small businesses
· Cancel the fee for changing the payment date on a credit card—this service is related to holding the card, which is covered by the monthly credit card fee, so the service should be provided without additional charge
· Small business management fee—bringing the position of small businesses in line with that of households, in order to make it easier to bear the financial cost involved in managing their current account
· Two additional amendments to the regulations: Changing the definition of "senior citizen", in order to automatically grant the right to senior citizens (not dependent on presenting a senior citizen certificate) to receive four teller-executed transactions per month at the cost of customer-executed transactions; legislating the Banking Supervision Department's determination that guarantees secured with a cash deposit are to be charged reduced fees.
5. The step: Requiring banks to publicize on their Internet sites a direct link to their fee schedule so that it will be available and accessible to customers
The goal: Increasing access to information, and increasing customers' ability to compare fees charged at various banks and to compare the fee listed in the schedule with that actually charged
6. The step: Declaring the service provided by a clearing company to the provider of factoring services, as a supervised service
The goal: Increasing competition between factoring services companies, which provide services to businesses seeking to receive the payment from credit card companies earlier.