Sources inform ''Globes'' that, a few days ago, Supervisor of Banks David Zaken drew up a proposal requiring the banks to provide their customers a credit rating once a year at no cost. The ratings will reportedly come into effect in January 2015.
The credit statement, a kind of bank ID card, will include details about a customer's bank account and financial status, but the most important piece of information will be a credit ranking. The publication of customer credit ratings will likely bring more companies into the business, especially investment institutions.
With the bank credit statement, investment institutions will not have to invest resources in finding out and analyzing a borrower's situation, but will have the information gratis, making it worthwhile to enter the field. The step could increase competition in the retail sector and deal with the banks' primary source of revenue -interest rate differentials.
"This recommendation is important, and it is no small blow for the banks," said a top banker today. Banking sources believe that implementation of the customer credit ratings and subsequent competition could cut the banks' revenue by 10%.
"The credit statement is a very strong recommendation," Zaken once told "Globes". "The low competition is due to the information gap between the customer and the bank. For example, the information gap in mortgages is low, so we see high competition."
Last Thursday, a year and four months after the recommendation was first published, the Bank of Israel announced the information that the annual credit statement, as it is officially called, will include: general information about the bank account, assets and liabilities by type, deposits by type (stocks, bonds, etc.) in the assets column and mortgages, loans, and guarantees in the liabilities column. The statement will also include transactions, income and expenditures, including by credit cards. The statement will conclude with a customer credit rating, the bank's rating scale, and the customer position relative to the scale.
Published by Globes [online], Israel business news - www.globes-online.com - on November 4, 2013
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