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Fischer: Regulate Bank Fees Only in Non-competitive Areas

Bank of Israel Governor Stanley Fischer told a Knesset committee on banking fees yesterday that price regulation should be avoided.

Bank of Israel Governor Stanley Fischer told a Knesset committee on banking fees yesterday that price regulation should be avoided. "We are trying to avoid regulation of fees in competitive areas, but rather only those fees that reflect an uncompetitive price."

The committee is due to submit intermediate recommendations next week and include legislation to increase the regulation of banking fees - a move the banks oppose.

The Knesset Economics Committee is due to discuss bills for increasing regulation, hoping to incorporate them into draft legislation to be submitted to the Knesset shortly.

Fischer also noted return on capital in the Israeli banking system is low compared with banks abroad, at 14.5 percent in 2005 versus an international average of 15.4 percent. He said it is natural to refer to banks' profits in terms of billions of shekels, but one should also examine earnings in relation to the banks' capital.

Fischer believes that the Supervisor of Banks rather than the Knesset should be authorized to specify the number of banking fees applicable to households. Nevertheless, the governor said the number of fees should be reduced, and noted that a government-sponsored bill has been drafted that would grant the Supervisor of Banks the authority to regulate fees. Fischer expressed hope that the government bill will be submitted to the Knesset soon. The committee's chairman, MK Moshe Kahlon (Likud), praised Fischer's comments on reducing the number of fees. MK Gilad Erdan (Likud) said the structure of regulation should be reviewed for the benefit of consumers. Erdan proposed establishing a regulating authority to unify all financial bodies.

But Fischer said he is "concerned about an excess of changes proposed to the financial system. Such a question requires more thorough work." He said the financial system needed stability after the changes that have taken place over recent years.

Bank Hapoalim Chief Executive Zvi Ziv opposed the proposed bill to increase the authority of the Supervisor of Banks over banking fees. "Legislative procedures in the area of banking, and all other financial areas, should be avoided." he said. "We have proposed reducing the number of fees and increasing transparency. The issue doesn't need to be dealt with through legislation, but rather through negotiations with the regulator." Ziv said only 14 percent of Bank Hapoalim's profits in 2006 were derived from households.