| Regarding the banks' recent announcement of raising their fees, the Bank of Israel notes that setting fees in general is determined according to the banks' business considerations and is under their responsibility. The Bank of Israel considers of utmost importance the level of market discipline that dictates the bank's actions, which ensues from the level of competition in the sector. Therefore the Bank of Israel has taken various steps to encourage competition, such as easing the conditions for switching from one bank to another, and inducing the proper disclosure of banking service costs, etc. This is, of course, in addition to the Bank's participation and support of comprehensive structural reforms, such as the Bachar reforms. |
| The recent hike in banking fees apparently points to an insufficient level of competition in the sector. Such a problem cannot be solved through sweeping supervision of fees. Such supervision could be applied only in particular banking services where the problem was most acute. |
| The Banking Supervision Department at the Bank of Israel is not empowered by law to supervise the level of banking fees. This authority is vested in the Price Controller in the Ministry of Industry, Trade and Labor. Therefore the Supervisor of Banks approached the Price Controller today with a recommendation to supervise certain banking charges and to examine the need to subject other fees to supervision: |
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Fee for drafting credit documentation. This fee duplicates the interest rate charged on loans or credit lines; it distorts the price of credit, particularly in the short term; its graded tariff structure is also distorting (and emphasizes its nature of being a duplicate charge of the interest rate); it makes proper disclosure more difficult and thereby makes it harder for clients to compare alternative proposals from the banking and non-banking sector (the latter not having such fees). These problems are particularly severe for retail customers and small businesses, and therefore the Supervisor of Banks has suggested that this fee be brought under supervision, and that at least regarding loans and credit frameworks up to NIS 100,000, such a fee should not be charged. |
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Fee for using a credit card. This is in addition to the management fee charged by the credit card company. Such double charging makes it more difficult for clients to compare the management costs of the card and therefore it would be better to have only a single card management fee. |
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The Supervisor of Banks proposes that no new charges be allowed for existing services. The banks' rate roster list already contains a particularly long list of banking fees, and it would not be appropriate to see this list increased without justification. |
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The Supervisor of Banks proposes that the justification of additional fees be examined, for those fees that duplicate the interest rate costs or other fees imposed on the client, such as the fee for credit collection, and Israel Discount Bank's new fee––fees for managing an account from post-dated payment instruments––which will duplicate charges for depositing post-dated checks and charges for managing a business client. |
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The Supervisor of Banks proposes that the justification for the high level of other fees be examined, particularly the fees for which clients have no other choice, such as the fee for recovering account statements. |
| The Bank of Israel nevertheless repeatedly urges that the supervision of prices cannot replace market powers, and therefore client involvement––in comparing prices, in negotiating fees, and in choosing the best possible alternative––is of the utmost importance.
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