Finance Minister Moshe Kahlon, together with Bank of Israel Governor Karnit Flug, jointly named a committee to weigh plans for introducing more competition into banking and financial services.
The panel, which will be chaired by Dror Strum, a former Antitrust Authority chief, is supposed to identify way of bringing new players into the sector, including by forcing the banks to spin off their credit card subsidiaries. The committee was given 100 days to complete its work.
“Our goal and the committee’s is to bring real competition to one of the most concentrated sectors of the Israeli economy, the banking system,” Kahlon told a news conference. “If we’ve learned something it’s that excessive levels of concentration cost households hundreds if not thousands of shekels unnecessarily every year.”
Kahlon made breaking up the banking cartel a key part of his election platform earlier this year, but it also became one of the first issues he clashed with Flug over. The Bank of Israel looks askance at divesting the credit card companies from the banks out of concern it will weaken a key sector of the economy.
The two, however, agreed last month to form a committee to explore the subject and on Wednesday Flug gave the panel her backing, noting the central bank’s years of efforts at trying to introduce more competition into the sector.
“The committee will be recommending additional measures to increase competition and fairness in the financial system while ensuring proper regulation, ensuring the money of depositors and savers and the stability of the financial system,” she said.
Kahon said Israel’s big three banks – Hapoalim, Leumi and Israel Discount — control about 70% of the credit in the economy, which he said “isn’t reasonable.”
The panel, which will have representatives from the Finance Ministry, central bank and the Antitrust Authority, will propose reforms. Among them are Avi Ben-Bassat, a former treasury director general; Amir Levy, who is in charge of the treasury’s budget division; Nadine Baudot-Trajtenberg, a deputy Bank of Israel governor; and David Gilo, the antitrust commissioner, who is stepping down in August
Strum has said he wants to improve the existing system rather than make radical changes and hopes to add two or three more bank competitors.
Israeli banks have been accused of charging excessive fees and making it difficult for depositors to move accounts or shop for the best loan terms. The Bank of Israel, especially under its previous governor, Stanley Fischer, tried to lure foreign banks without success.
More recently, officials have been working on plans to encourage Internet banks or credit unions to start operations.
Kahlon said he also seeks more competition in the insurance and pension market. Five large companies dominate the pension sector.