Bank of Israel Chief, Future Finance Minister to Examine Banking Competition

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Moshe Kahlon, January 8, 2015.Credit: Moti Milrod

Bank of Israel Governor Karnit Flug and Finance Minister-designate Moshe Kahlon on Monday agreed to promote competition in the supply of credit to small businesses and households.

It was the first working meeting between Flug and Kahlon, who will take over as finance minister once a coalition deal is finalized this week.

Vowing to tackle Israel's high cost of living -- especially housing prices which have doubled since 2007 -- and boost competition in the banking sector, Kahlon's upstart centrist Kulanu party won 10 seats in a March 17 election.

Kulanu reached a coalition agreement last week with Prime Minister Benjamin
Netanyahu along with the ultra-Orthodox United Torah Judaism party. Facing a May 7 deadline to forge a coalition, two more parties are in talks to join.

The Bank of Israel said Flug and Kahlon spoke about a variety of topics relevant to
Israel's economy, including the challenges to fiscal policy, the need to increase productivity, reducing the cost of living and measures to boost competition in the financial system.

They agreed to form a committee that would examine ways to promote competition in credit issuance, including separating credit card companies from banks. Kahlon believes this would enable credit card companies to compete with banks in providing loans.

Netanyahu's promises of increased spending to form a coalition have raised expectations that the budget deficit will expand.

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