Bank of Israel to reduce bank charges further

Hedva Ber

Supervisor of Banks Hedva Ber: Customers should be aware of the many tools available for reducing the charges paid.

Supervisor of Banks Dr. Hedva Ber today submitted her twice-yearly report on the prices of services frequently used by households to the Knesset Economic Affairs Committee.

At the same time, the Bank of Israel Banking Supervision Department sent the banks a list of measures it intends to take in the following areas: services tracks, handling of excessive charges, and charges for the purchase, sale and redemption of Israel securities and bonds. All the measures will be anchored in legislation required for their implementation.

Ber said, "The report we are presenting today shows that the cost of common basic services for households averages less than NIS 15 per account, and has been declining in recent years. A customer conducting more complicated bank transactions, such as transactions involving securities and foreign currency, pays more.

"A number of excessive charges have been addressed by the Banking Supervision Department in recent years by means of price controls or canceling the charge. At the same time, we believe that handling of the remaining excessive charges should be completed, the number of customers joining the service tracks should be increased, thereby lowering the cost of banking services, and charges for activity in securities should be regulated."

According to Ber, "The material we sent to the banks today outlines further measures in these categories, in addition to our principal initiatives for promoting competition, technology, and streamlining at the banks. When combined, these will further reduce the cost of banking services to households, and improve the product."

Ber adds that it is important for the public to be aware of the many tools available for reducing the charges it pays, such as:

* Switching to direct banking on the Internet, digitally, or through automatic devices, which is substantially cheaper than doing business at branches;

* Joining bank charges tracks, which can save money for both households and small businesses;

* Comparing banks to each other; there is a great difference in prices.

Ber called on households to engage in "educated and active banking consumerism, thereby saving on costs."

Adding elderly and disabled customers to the basic charges track

The services tracks enable households and small businesses to manage the costs of their current accounts simply and cheaply. Nevertheless, the proportion of customers joining the services tracks is still low, despite the personal letters sent by the banks to their customers and the explanatory campaign by the Banking Supervision Department in order to draw the customers' attention to their ability to profit by switching to the fee tracks.

According to the revised rules for charges sent to the banks today, they will have to scan all the accounts of their elderly and disabled customers, note those who have joined the services tracks worthwhile for them, and transfer them to the basic track, which will become the default option, while providing advance notice of this. The Banking Supervision Department's action is aimed at helping less mobile and active customers.

Reducing excessive charges

Despite the fact that the average cost per current account of frequent banking transactions is less than NIS 15 a month, there are still excessively high charges in the system, sometimes also in comparison with the cost to the bank of performing that service. The Banking Supervision Department has accordingly notified the banks of its intention to conduct a scan of charges for banking services for households and small businesses in 2016 for the purpose of identifying and dealing with these charges. Specific instructions will be given to the banks according to the findings from the scan. The Banking Supervision Department recommended that the banks conduct their own charges scan ahead of time, and reduce the excessive charges that they find.

Even before the comprehensive check, the following charges will already be discussed:

* Charges for "producing reports at the customer's request standard reports" - The rates for this services currently range from NIS 13 to NIS 55. According to a draft order sent to the banks by the Banking Supervision Department, it plans to limit this charge to NIS 15.

* Charges for changing the repayment date for housing loans - The charge stipulated in the Banking (Service to Customer) Law, which is currently NIS 125, will be reduced to the cost of a single transaction by a clerk - NIS 6.50. The Banking Supervision Department stresses that for this purpose, it will act in cooperation with MK Israel Eichler (United Torah Judaism), who has introduced a bill on the subject, to amend the Banking (Service to Customer) Law, so that the clause in the law stipulating the fee is eliminated.

Reducing the charge for purchasing, selling and redeeming Israeli stocks and bonds

Securities is a competitive sector in which many non-banking entities operate, and customers also have a broad range of non-banking options. At the same time, there is a large difference at the banks between the charge listed and the average actual charge. The listed charge for buying, selling, and redeeming a security at the five major banks currently ranges from 0.54% to 0.65% of the value of the transaction, while the actual average charge for this services is substantially lower. The Banking Supervision Department believes that the gap between the listed price and the actual price has a negative impact on transparency for customers, and consequently on competition in this sector. The Banking Supervision Department has therefore issued a draft supervision order for banks stating that the listed rate shall not exceed 0.4%.

Published by Globes [online], Israel business news - www.globes-online.com - on January 24, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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