The Ministry of Finance has plans to allow Israel Postal Bank to compete with its commercial rivals. A committee, headed by Accountant General Dr. Yaron Zalika has drawn up the blueprint for the proposed transition and will submit it by the end of March. The key recommendation in the proposal calls for the recruitment of a partner to run Israel Postal Bank’s banking services. The terms of the tender for the partner will be finalized by August 2006 with the choice of partner to be made at the beginning of 2007. The tender winner will be given one year to organize and commence operations.
Under the new scheme, post office branches will have a financial customer stand, where customers can deposit checks, make cash deposits and withdrawals, submit loan applications, apply for credit cards, open savings accounts and make deposits into closed funds. Some branches will also market life insurance policies, mutual, provident or pension funds as well as offering advice on investment and securities transactions. The postal bank will also provide end user services to insurance and credit card companies.
”This is another step in the implementation of the Bachar committee reforms,” said officials at the Ministry of Finance, “Israel Postal Bank will enable us to leverage genuine retail competition.”
The rationale behind the committee’s recommendations calls for the positioning of the postal bank as a platform, rather than a player. Israel Post will provide the distribution infrastructure while the postal bank will bear the operational but not the financial risk as expressed in credit, interest rate margins etc. The partner, a body that will operate on the Postal Bank’s platform, will provide the necessary management, contribute its know how as well as the financing for the banking services. It will also bear the credit risk on the basis of its equity.
One of the options under consideration is a contractual engagement with an existing bank that will market its goods through the new postal platform. Bank Hapoalim (LSE: BKHD; TASE: POLI) and Bank Leumi (TASE: LUMI) will be prohibited from bidding for the tender and the choice of operator will be made from among the medium sized banks: United Mizrahi Bank (TASE: MZRH), Israel Discount Bank (TASE: DSCT), First International Bank of Israel (TASE: FTIN1;FTIN5), or Union Bank of Israel (TASE: UNON). Cooperation can either be on the basis of space leased in branches, exclusive marketing of products for commission, or a joint venture that will include the launch of a new brand.
Another option is the selection of a non-banking business entity. This could include insurance companies such as Migdal Insurance (TASE: MGDL), Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) ,Harel Insurance Investments (TASE: HARL) or an operator that is new to the sector such as “Delek Group Ltd. (TASE: DLEKG) or Africa-Israel Investments (TASE: AFIL). Another option will see Israel Postal Bank contract with several financial bodies, with the bank operating as a broker offering customers a ‘one stop shop’ for products offered by a various bodies.
Published by Globes [online], Israel business news - www.globes.co.il - on March 7, 2006