Bureaucratic Snafu Delays Internet Banking at Israel's Central Bank

The right to open a bank account over the Internet – a key step in the Bank of Israel’s efforts to open the sector to more competition – was supposed to go into force two weeks ago. But it never did because a key document enabling it to go into effect sat on a bureaucrat’s desk for two-and-a-half months.

• Israel’s finance sector is screaming for reform
• Are Israel's banks using the people's money to control the people?
• Israeli banks more inefficient than in most developed nations

David Zaken, banks supervisor at the Bank of Israel, announced with great fanfare in July his plan to enable Israeli to open accounts online. It was all supposed to happen September 15, and the banks themselves work feverishly in the next 60 days to ready themselves.

But in the two weeks since then, not a single bank has offered the service. An inquiry by TheMarker with Zaken’s offer elicited a response that the new rules were in force but that the banks have yet to launch the service. A spokesman suggested asking the banks why they are delaying.

But spokespeople for the banks were surprised to hear that it was their fault. Yes, they said, the directive authorizing opening accounts online had been issued, but no one had amended another rule that requires banks to get clients’ signatures on paper in person.

In other words, you could open an account online so long as you come into the bank to do it.

Further investigation found that, in fact, Zaken’s office had indeed written the amendment allowing all the steps to opening a bank account to be done digitally and even got the approval of an advisory committee. But to complete the process it needed the signatures of the finance minister and the governor of the Bank of Israel, as well as clearance from the Justice Ministry.

But for two-and-a-half months it sat on the desk of a clerk in the Bank of Israel legal department rather than being sent out. A spokesman for the central bank termed it a personal mistake.

Now that the document is finally making the rounds, however, the Bank of Israel said it could not promise when all the authorizations and signatures would be completed. That’s in the hands of outside bodies.

When the right to open an account online does happen, observers say it promises to fundamentally alter the relationship between Israelis and their banks. People will be able to switch banks quickly and easily and will increase the number of people with multiple bank accounts, enabling them to choose which bank and which service they want to take based on fees and other terms.

Thus, for example, someone will be able to open an account just for the purposes of getting a loan and opening a time deposit while keeping his basic checking account at another bank.