Banking regulator wants leaner banks

Hedva Ber   photo: Eyal Izhar

Dr. Hedva Ber: Streamlining in the banking system is essential in order to lower the cost of service to the public.

Speaking at the Globes Israel Business Conference yesterday, Supervisor of Banks Dr. Hedva Ber outlined her vision of leaner, more efficient Israeli banks.

"Streamlining in the banking system is essential in order to lower the cost of service to the public and in order to ensure that the banking system remains resilient in the face of future changes and that it can adjust to a technological and competitive world," Ber said.

"A year ago, we instructed the banks to formulate significant streamlining programs and to reduce the gap in the efficiency indices vis-à-vis the other OECD countries," she continued, "We allowed the banks to spread the cost of the streamlining programs and to implement them without negatively affecting their ability to meet capital adequacy requirements. The concept that led this process was that inefficiency in the banks rolls over to their customers and shareholders who, for the most part, are the broad public through the pension, provident and advanced training funds. The programs served a double purpose: to lead to a situation where the public would enjoy services at lower cost and greater convenience, as well as higher dividends; and so that the banking system would bring itself in line with the new competitive-technological environment taking hold.

"The banks set out significant streamlining programs for the years 2016–2020, which would lead to significant savings of more than one billion shekels each year at the end of the programs’ implementation. The savings would be directed toward technological improvements, from which the banks’ customers would benefit in the form of greater convenience in their interface with the bank; increased dividends, which would benefit the public through its pension savings; and reduced costs. For instance, we instructed the banks to present a fee schedule, starting in 2017, that includes a significant discount on all customer-executed transactions.

"In response to the Banking Supervision Department directive, the banks set out streamlining programs through which about 5,100 employees would leave the banking system between 2016 and 2020, through voluntary retirement or natural retirement (most of whom will not be replaced by new employees). This represents a gross reduction of 12% of the banking system’s workforce. In parallel, the programs published show that the deployment of branches will be changed, such that by 2020, the number of bank branches in Israel will be reduced by about 20%. Alongside this, significant changes will be made in the banks’ internal work processes and vis-à-vis customers. The reduction in the number of branches being implemented by some banks will take place as customers transition to direct banking, which is being made available, inter alia, through Banking Supervision Department directives that make it easier to carry out transactions remotely, and innovative digital developments being advanced by the banks."

Published by Globes [online], Israel business news - www.globes-online.com - on December 12, 2016

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

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Hedva Ber   photo: Eyal Izhar
Hedva Ber photo: Eyal Izhar
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