The banks, as is their wont, are making a dreadful name for themselves. This week they outdid themselves, when leaks about the recommendations taking shape at the Bachar committee drove them to threaten to reduce the provident and mutual funds they run to rack and ruin.

How? By dissuading the public from investing, by guiding it to invest in other instruments, only because the latter are more profitable for the banks. Now, that's an inspired PR move.

Really, it is hard to think of anything that would inspire less confidence in the fairness of Israel's banking system and in the sincerity of the advice they give the public. Did they think their threat would make the Bachar team capitulate? If anything, it proved how right the team is and how desperate is the need to change the method under which they give advice.

Yet one cannot ignore the fact that some of the banks' claims abut the Bachar recommendations are right. They are right that private brokers would get unfair advantages and worse, that the insurance companies would too.

The Bachar team means to slap onerous restrictions on the banks to ensure their advice is untainted by conflicts of interest. To achieve that, the committee is preparing two draconian measures.

One is to force the banks to relinquish their provident and mutual funds, and forbid them to collect distribution fees from the funds for hawking them at the bank branches. Yet the private brokerages will be permitted to continue managing provident and mutual funds, and to market their funds to the public.

Apparently the committee feels conflicts of interest are a matter of geography - when a bank sells units in a fund it runs, it has conflict of interest, but when a broken does the same, even if his funds are inferior to those of a rival broker, that's perfectly fine.

The committee seems to think brokers are immune from choosing revenues from management fees over the customer's greater good. If brokers are pure as the driven snow, then naturally one can think nothing but sweet thoughts about insurance agents. Here too the committee allows them to get away with things the banks may not.

Agents may choose to continue receiving pay from insurance companies, while selling that company's insurance to the public. They do have to disclose their affiliation, but that does not resolve the conflict of interest under which they operate.

The banks would be delighted to provide disclosure as long as they could continue to operate and market their funds in peace.

One might understand the committee's leniency toward the private brokerages. They are minnows in the capital market. But the lenience over conflict of interest in insurance policies is unforgivable.

Insurance is one of the most complicated financial instrument there is, making it the easiest one for fooling clients. Indeed, for years the insurance companies and their agents made merry while their clients remained in blissful ignorance of how they were being ripped off.

They sold policies with horrifyingly expensive risk elements, or persuaded customers to replace insurance companies for no good reason. Conflict of interests in insurance aren't theoretical, they're right out there. Allowing it to continue is, at best, negligence.