Finance Minister Bezalel Smotrich and Bank of Israel Governor Professor Amir Yaron announced a new measure in their fight against concentration in the banking sector. They have formed an inter-ministerial team, which will focus on enhancing competition in the banking and credit sector for small businesses and households.
The team, which will be headed by the Superintendent of Banks and Budget Commissioner of the Ministry of Finance, aims to “remove obstacles preventing the entry of new players into the market and achieve the development of additional activities by existing players.”
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The new team will need to work quickly. The Ministry of Finance and the Bank of Israel issued instructions that the team’s report on the recommendations must be submitted by April 2025.
One of the key goals set for the team is to design a framework for tiered banking licences, which would allow non-banking entities to make deposits and extend credit. The Ministry of Finance and the Bank of Israel believe that this move “will fundamentally change the financial market, expand consumer choices and reduce financing costs for households and small businesses.”
“decisive moment”
The establishment of the team comes after the harsh criticism directed at the financial system by the Governor of the Bank of Israel last week. Yaron said: “The banking system is characterized by insufficient competition. The high profitability of banks in Israel depends largely on the huge current account balances that the public maintains in their accounts, which constitute a cheap source of financing for banks.” According to him, banks, on their part, are not providing decent returns to customers.
Smotrich said that the creation of the team is “a crucial moment in the struggle to lower the cost of living. Opening the deposit market will inevitably lead to competition for credit and will be a historic step that will improve the well-being of Israeli citizens. We are determined to create a diversified, competitive and accessible credit market, “This will save Israeli citizens thousands of shekels and boost the entire economy.”
“The best way to enhance competition is to remove barriers that prevent new players from entering the financial system and developing new activities,” Yaron added.
Published by Globes, Israel Business News – en.globes.co.il – on December 2, 2024.
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