The Zaken committee, which has been developing policy recommendations to increase competition among banks, is expected to propose opening the consumer credit market to greater competition in its final report, due in about a week.
The committee, headed by David Zaken, supervisor of banks at the Bank of Israel, will only advocate limited access to credit data due to privacy concerns raised by the Justice Ministry. Opening the banking sector to stiffer competition requires a credit reporting system so that banks that have no prior experience with a potential customer can obtain sufficient information to extend credit. Although in other countries, particularly the United States, credit data firms have wide access to banking information, that kind of access is not currently allowed here and will not be allowed under the proposal taking shape on the Zaken panel.
The members have reached a compromise with the Justice Ministry allowing the establishment of a computerized clearing house of credit data on individuals. Broader access to the data will require legislation that would impose an obligation on all the country's banks to establish a data collection system on their customers' credit practices.
Other banks would only have access to the data with the customers' consent. If, for example, customers seek the services of a bank where they are not customers, they would have to agree to have their other bank release the data to the new one. This enables the new bank to assess the risk that the customer will not repay a loan, and allows the bank to set an interest rate accordingly. Some experts claim such a system would fail by not sufficiently encouraging competition in the banking sector.
Certain negative credit data are currently available to the banks about other banks' customers, such as those who bounce checks, but the data is nearly irrelevant to the industry because it involves only a very small percentage of customers.
Although current law does allow customers to consent to disclosure of their credit history to another bank, in practice it rarely occurs. The automated system would allow the data to be shared with a press of a button.
In other news related to bank credit, Bank Hapoalim announced on Sunday that it would be increasing the credit available to small businesses and reduce bank fees for small enterprises.
Hapoalim said it would make special funds available to small businesses to double available credit to them, providing more than NIS 2 billion beyond regular financing that the bank makes available to them. The reduction in bank fees will include a reduction in the teller charge ("amlat pakid" in Hebrew ) from NIS 6.50 to NIS 3.25, as well as an exemption from bank account fees for new businesses and initial business advice through a consulting firm.
Bank industry analyst Adi Scop of IBI Investment House noted that the move comes ahead of recommendations by the Zaken committee. The recommendations, Scop said, are expected to include a reduction in bank fees for small businesses.
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