Fischer Scores Banks on Pay, Fees

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Bank of Israel Governor Stanley Fischer took the heads of the country's banks to task for their excessive salaries and bank fees in a recent private conversation.

In the private talks two weeks ago, Fischer also warned the CEOs and chairmen of the lenders to act cautiously in mortgage lending and to contain overall salary costs - not just those of the highest-level executives - saying that Israeli banks' wage costs were higher than their peers overseas.

Among the commercial bankers joining the call were the chairmen and CEOs of the top five banks, as well as those of Israel Union Bank and Bank of Jerusalem.

"You must adjust the level of your salaries to performance. Set your salary such that you will be able to look the public in the eye and be able to justify it," Fischer told the bank chiefs, most of whom cost their employers up to NIS 10 million a year in total compensation.

Fischer said that the banks' return on capital is lower than that of banks overseas, which he attributed to inflated wage costs. He told them they have to "find a way to deal with this."

Wage costs at the top five banks are about NIS 17 billion annually, for some 48,000 employees. In the past year, most of the banks have had to take efficiency steps by laying off thousands of staff, but the banks' managements have so far avoided addressing the crux of the problem, namely the collective wage agreements.

Fischer conceded that he had failed in his mission since taking office in 2005 to convince a foreign bank to enter the Israeli market. "Today when the big banks of the world are in the process of retreating to their home countries, the chances are even lower," he said.

Bank of Israel Governor Stanley Fischer.Credit: Tomer Appelbaum

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