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The Knesset Economic Affairs Committee on Tuesday passed a bill in a second and third reading that provides for regulation of bank fees, and is scheduled to go into effect January 1.

The bill empowers the governor of the Bank of Israel to designate a list of fees that the banks will be allowed to charge within three months of the legislation. According to assessments, the list will include roughly 90 fees. The banks will have three months to make preparations after publication of the list, and this period may be extended by an additional three months. The bill, if passed, is thus scheduled to be fully implemented by July 2008. The committee fixed a fine of NIS 1.5 million for banks that break the law.

The governor of the Bank of Israel will also determine a list of services for which banks will be allowed to charge fees. Any increase of fees will be subject to the approval of the supervisor of banks, as will introduction of new fees.

The committee accepted the Bank of Israel's position, according to which the central bank's governor will be granted authority to determine the scope of the law.

The committee rejected the banks federation demand, which stated that only fees charged to household accounts with a monthly income of up to NIS 10,000 and savings or deposits of up to NIS 157,000 be subject to regulation.

The committee also approved a proposal submitted by MK Gilad Erdan (Likud), according to which any request to increase regulated bank fees will be brought to consumer organizations for their comment. In addition, the committee rejected a proposal to allow banks to automatically increase fees in the absence of a response from the Bank of Israel.

Banks will also be obligated to report to their customers on all fees charged on a quarterly basis and will be prohibited from charging for money transfers from one bank to another. Following the bill's approval, committee chairman Moshe Kahlon said, "Our only interest has been that of the consumers. We have been subject to insult over the past few days, by individuals who sought to present our achievements as something despicable. A crusade was conducted against Knesset members, and now it is clear to everyone that we have delivered good news to consumers.

Notably, the approved bill's wording is not entirely in line with recent pronouncements by some MKs. Among other things, they have tried to set the fee list themselves. Though some MKs requested that the Bank of Israel publicize an index of fees, the committee determined that the governor will be authorized, rather than required, to do so. The committee also did not specify the number of fees allowed to be charged nor address the possibility that the banks will increase interest rates as an alternative to canceled fees.