Smotrich in talks to bring int’l banks to Israel

Minister of Finance Bezalel Smotrich has revealed that he is in talks with two international financial organizations about potentially launching banking activities in Israel. Smotrich was addressing the Knesset Finance Committee during a discussion about the interest rates charged by the banks on mortgages and loans on the one hand, and bank deposits on the other hand.

Smotrich said, “The banking system in Israel is one of the most concentrated in the world. This is reflected in the scope of services, the amount of credit, the quality of services and the cost of services. Ultimately, the real solution to the banking issue is competition. Since we cannot wait for sophisticated competition to develop, because people are already ‘suffocating’ today, we are already making various moves ourselves. “The state has taken many steps in recent years for competition in the sector. There are digital banks, we have simplified regulation and we are in discussions to simplify it even more, and I am currently in dialogue with two international bodies regarding their attempts to enter here, into the banking system in Israel,” said the minister.

Smotrich spoke about moves to simplify regulation, which he thinks are taking too long, including online banking and open banking, which should, make it easier for bank customers to switch from bank to bank. He noted that he recently postponed implementation of the open banking reform by three months but stated that there would be no further delay in this matter. On this matter, Smotrich was critical of former Supervisor of Banks Yair Avidan, who stepped down last month.

Smotrich said, “If I were a bank, I would also drag my feet on this issue, because open banking will make it easier for people to move between banks, and will create more competition. The handling of this led by the previous Supervisor of Banks was far from satisfactory and too little was done too late.

“From now on, I want to discuss the matter on a weekly basis, to make sure that the pressure and directives of the Supervisor of Banks towards the banks will be more dramatic. I will make sure not to interfere with the Bank of Israel’s work, but it must also understand that it needs to act much more decisively with the banks. It is possible to freeze interest rates, or to give grace periods (postponement of the principal payment for a certain period), to spread the loan payments over a longer period. There are banks that already do this, but in my opinion it is not enough.”

Smotrich stressed what he thinks could help change the situation in the banking system and make competition effective and real: public awareness. According to him, if the elected officials get involved in the matter, this situation will change significantly.

“What makes it more difficult for us today than anything to create competition is public awareness,” said Smotrich. “If we conduct a joint campaign, coalition and the opposition, with interviews, and statements in the media – it would bring about dramatic change. 120 MKs who would participate in an awareness blitz on the issue could bring a big change in consumer behavior. Today we see a great loyalty of customers to their banks.”

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Smotrich added, “I am currently looking for the formula that will result in the state taking maximum profit from taxing the banks, in such a way that it would not go to the state treasury just like that, but that we would allocate a specified amount from it to the relevant target populations. We are very close to finding such a formula.

“The main reason for my meeting last week with the Bank of Israel Governor and his team was to analyze the areas, the borrowers who are having the most difficulty, and to understand how to provide the precise answer. When we deal with these areas, we will not fuel inflation either.

“If we require a certain margin between the interest rate for credit and the interest rate on deposits, we may receive less credit. In my opinion, such a proposal is not a good proposal. Banks have no motivation to give credit now, they are profitable enough even without it. The result will be much less credit for those who need it really. “We are examining other avenues – examining a tender for a default deposit, in order to produce a more correct delivery. Ultimately there will also be assistance from us, the government, in the areas where we know how to disperse matters.”

Published by Globes, Israel business news – en.globes.co.il – on July 3, 2023.

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