Knesset C'tee Backs Regulating Bank Fees

BoI expected to list 90 fees, vs hundreds today

With Shlomi Sheffer

The Knesset Economic Affairs Committee yesterday approved a bill to regulate bank service fees. The bill empowers the governor of the Bank of Israel to designate a list of fees that the banks will be allowed to charge.

If passed, the bill is scheduled to be fully implemented by July 2008.

The list is expected to run at roughly 90 fees, instead of roughly 350 today.

The banks would have three months to prepare after the list is published, a period that may be extended by an additional three months.

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.

Only the rich? No

The committee rejected the Association of Banks' demand that regulation be confined to 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.

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.

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.

National pastime

Jacob Perry, chairman of Mizrahi-Tefahot Bank (TASE: MZRH) , quipped that hating the banks is like the national hobby in Israel. 

Referring to claims that the banks' fee policy is deliberately opaque, so people don't really realize how much they pay, Perry argued that people don't understand their cellphone bills either.

Interestingly, before taking the job at the bank, Perry had been chief executive of the cellular provider Cellcom (NYSE: CEL).

Understanding one's monthly bill has nothing to do with anything, he argued, a hair bizarrely: "You don't understand your cellular bill either. But you are welcome to inquire. Any bank branch would be glad to explain it."

He supports revisions, Perry said. "I have said in the past that each bank should examine whether it has fees that could be lowered or abolished," he said, but the ruckus has turned the whole issue into a political one.