Some banks intend to raise their fees for the purchase and sale of mutual funds in response to the Bank of Israel Banking Supervision Department’s plans to abolish depository fees for securities as part of its plans to simply the fees pricelist and improve transparency.
Currently, only Israel Discount Bank (TASE: DSCT) charges a mutual funds fee of 0.1% of assets. Two other banks are contemplating instituting a similar fee amounting to at least 0.5% of assets, to come into effect in a few months.
The banks’ aggregate revenue from fees on securities totaled NIS 2.4 billion in 2006. The banks believe that the cancellation of the depository fee alone will cost them more than NIS 1 billion in revenue. They note that Governor of the Bank of Israel Prof. Stanley Fischer has repeatedly said that supervision of bank fees on the basis of the new Bank Fees Supervision Law would not affect the banks’ revenue. The banks also estimate that their aggregate revenue from fees for the purchase and sale of mutual funds at a rate of 0.5% of assets at NIS 400 million a year, which would partly compensate from the loss of revenue from cancelled fees.
The banks are angry at the Bank of Israel’s plans to cut the number of fees. “The Bank of Israel has made no assessment of the impact on revenue caused by the change in fees, and has set up no mechanism for fair compensation,” said a top banker today. He called the fee cut “camouflage” and said that the cancellation of fees for formulating documents and so on would cause the banks to raise interest on credit and loans in order to maintain their present level of income.
The Bank of Israel rejects these arguments, and believes that the banks’ calculations on the effect on their revenue are wrong and distorted because they are based on the official pricelist, and do not take into account the discounts that the banks give.
Published by Globes [online], Israel business news - www.globes.co.il - on July 22, 2007
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