Two years ago, I met the CEO of a new bank in New York, established five years earlier. A group of businessmen, one of whom had a banking background, raised $10 million and started a bank. It focused initially on weaker populations, immigrants, people without a credit history, and offered them straight forward, affordable banking services, with the aim of helping them grow together the bank. Today, that bank is thriving, with a number of branches providing full services right under the noses of the giants.
There are thousands of banks in the US, many of them new. Hundreds of banks operate in Switzerland, the world's banking capital, while tens more operate in the Netherlands.
And in Israel? Bank Leumi (TASE: LUMI) was founded in 1907 by the Jewish Colonial Trust, Bank Hapoalim (LSE: BKHD; TASE: POLI) was founded in 1921 by the Histadrut (General Federation of Labor in Israel), Mizrahi Tefahot Bank (TASE:MZTF) was founded in 1923 by the Mizrahi Movement, Israel Discount Bank (TASE: DSCT) was founded by the Recanati family in 1935, the General Bank was founded in 1934, while the "newest" of the bunch, First International Bank of Israel (TASE: FTIN1;FTIN5) was formed in 1972 by the then Finance Minister Pinhas Sapir through a merger of a number of existing banks.
The conclusion: If you didn't belong to the right party or family back in the days of the British Mandate, your chances of owning a bank today are virtually nil.
Israelis initiate business ventures both in Israel and across the globe; including acquisitions of, and partnerships in, banks worldwide. Only Israel remains an impenetrable fortress. No new banks have been launched, and acquiring an existing bank is the kind of long-term nightmare that any sane person not prone to suicidal tendencies will stay clear of.
Public money and bank stability can be safeguarded in many ways such as insurance for deposits, as is the practice in the US, regulation of bank risks in the various sectors, and so on. But actual competition - efficiency, lowering and simplifying fees - can only be achieved by actual competition.
Without giving new players the chance to join the game, there will be no competition. No amount of legislation, bank fee regulation, caps and constraints will increase competition and efficiency. We already know this from the history of communist regimes, and of the State of Israel when it was first founded. It is now time that regulation was liberalized, thereby enabling the economy to break free from the bureaucratic bottlenecks.
We have been accustomed to thinking that what is needed is some sort of black magic and the cracking of a secret code that the Bank of Israel alone will have to work on secretly for years. This is nonsense. There is no reason why the list of qualifying requirements for bank ownership should not be simple, clear, concise, and easily available on the Internet.
I have no doubt that in the feedback in response to this article people will say: Everything is free, open and accessible, the qualifying requirements are clear, the buyers didn't provide enough information, we don't need any more banks, small banks are risky, permits have been given every so often, and so on and so forth. But the overall picture is that the clerk who issued licenses left together with the British in 1948.
The writer is co-president and CEO of Tamir Fishman & Co..
Published by Globes [online], Israel business news - www.globes.co.il - on June 28, 2007
© Copyright of Globes Publisher Itonut (1983) Ltd.