Last update - 00:00 23/11/2006
Bank of Israel Governor Fischer slams banks for `ridiculous` fees
By Tal Levy, Haaretz Correspondent
Bank of Israel Governor Stanley Fischer on Thursday strongly criticized banks for charging their costumers "ridiculous" fees.
"Only strengthening competition would benefit customers," Fischer said at a conference held by the Association of Banks at the Tel Aviv Sheraton Moriah hotel.
"The ridiculous list of fees does not contribute to this competition," Fischer said. "I don't understand why the Israeli bank system functions in this manner while in other countries banks earn their money mostly from margins."
The margins represent the differences between the return on the bank's assests and the interest the bank pays out on its liabilities. If a bank borrows at an interest of 4.25 percent and lends out the money at an interest of 5.5 percent, the bank's interest margins will be 1.25 percent.
Fischer stated that one bank has recently raised its fees and other banks followed in its footsteps, signaling at apparent coordination between the banks.
Fischer spoke of the challenges facing Rony Hizkiyahu, the next Supervisor of Banks at the Bank of Israel, and reiterated the need to strengthen the competition between banks.
"This in one of the main goals of the Bank of Israel," Fischer said. "We must strengthen competition in the field of services given to households and small businesses."
Fischer also addressed the market's condition of the economy, stating that "the Israeli economy is in good condition and the market is in expedited growth."
"The economy is expected to grow at a rate of 4.8 percent in 2006," Fischer Said. "This is an unbelievable rate, when one takes into account the fact that there was a war this year that negatively affected growth in the third quarter."
Commenting on inflation, Fischer said that while it was lower than government goals in 2006, "we will return to our goal gradually."
Fischer addressed the banks saying that "the macro-economic status of the market is very good, but it's important to maintain its status and not become lethargic. We must take into account that the good conditions we currently enjoy may not go on forever, and we must always maintain the banks system's cautiousness."