With mortgage payments becoming more expensive as the Bank of Israel raises interest rates, bank customers might at least soon be paying lower fees on their current accounts. The Banking Supervision Department has set out its plans to cut fees in a draft paper published today on an update to the Fees Rules entitled, "Reform in bank fees for households and small businesses."
The Supervisor of Banks proposes revising the method of charging current account fees and switching to a mechanism that guarantees the best track for customers. Israeli banks currently offer two tracks for calculating current account fees. The first is a separate charge for all transactions conducted by customers (pay-as-you-go), while the second is joining one of the existing track services. Among these tracks, there is the option of joining one of the basic tracks at a controlled price of NIS 10 per month, or an extended track with a price that varies from bank to bank, ranging between NIS 20-30.
For example Bank Hapoalim charges a fee of NIS 8.8 for five transactions conducted directly, none of them through a bank clerk, while the basic track, as stated, costs NIS 10, and the extended track costs NIS 22. In this instance the bank will direct the customer towards a charge for each transaction costing NIS 8.8. There are banks like Union Bank and Massad that charge customers for every transaction in a mix of transactions that is more expensive than the supervised track of NIS 10, so that the customer is directed in that month to the basic track.
When moving to a more major mix of transactions, the picture changes. If examining, for example, Bank Leumi with a mix of transactions involving two transactions using a clerk and 10 transactions undertaken directly, the calculation for each transaction will cost the customer NIS 27.50. Here the customer will be charged according to the basic track - NIS 15.50 for any given month.
The Supervisor of Banks draft also refers to updating the optimal track, which enables customers to choose to join voluntarily, and is not included in the calculation of the three previously mentioned tracks - according to each individual transaction, the basic track and the extended track.
The optimal track is for customers who maintain extensive banking activities and are interested in a track that gives them additional value, beyond the basic services which can be implemented directly or through a teller. Today, this track includes the amount of current account transactions included in the optimal track as well as additional services. According to the draft update, this track will be expanded, so that the amount of teller and direct operations included in it will be unlimited, with the aim of distinguishing it from the other two tracks, so that it will be a unique and competitive product.
The Supervisor of Banks also proposes expanding the definition of "small business" from a business with turnover of up to NIS 5 million per year, to a business with turnover of up to NIS 10 million per year. Thus, many more businesses will be able to benefit from the lower-cost retail fee schedule.
The Supervisor of Banks further proposes changing the default in subscribing a small business to the low-cost fee schedule. Until now, a business was required to send an annual statement to the bank in order to join the lower-cost fee schedule. In accordance with the new draft guidelines, the default has been changed. All companies will be defined as "small business", and the bank will be permitted to request an annual statement in cases where it has reason to believe that the company’s turnover exceeds NIS 10 million. In order to prevent the misuse of the benefit, in cases where the bank’s request for an annual statement is not answered within 90 days, the bank will be able to classify the business as a "large business."
Supervisor of Banks Yair Avidan said: "The Banking Supervision Department is working to advance a number of significant measures in the area of banking system fees, with the aim of making it easier for the public and improving the payment mechanisms for basic banking services, so that they will be more in line with the customer’s actual activity and lead to the lowest possible payments for customers. As part of this, we are advancing a new charge method for current account transactions, such that in each round of charges, the lowest possible price will automatically be collected from the customer. In addition, we are advancing a number of measures that will enable more small businesses to benefit from the lower-cost fee schedule. These measures are part of a set of proactive measures that we are advancing to benefit customers, which will give them the power and enable them to consumer basic banking services at a fair price."
Published by Globes, Israel business news - en.globes.co.il - on November 6, 2022.
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