The Bank of Israel approved 96% of the requests by banks to close branches, according to figures obtained from the Bank of Israel and published by the Movement for Freedom of Information (the figures are for closing branches in Israel). Two years ago, an amendment to the Banking Law went into effect stating that closing a branch required approval from the Bank of Israel. Figures obtained by "Globes" show that over a two-year period, 125 of the 130 requests submitted for closing branches were approved. For the sake of comparison, only 17 requests to open branches were received.
94 of the requests were immediately approved. The Bank of Israel approved 31 of the requests with conditions, such as operating a mobile branch or leaving an ATM in place of the closed down branch. Five requests to close branches were rejected.
Banking sources said that a high proportion of requests were approved because the banks are not seeking to close down branches in difficult places, such as location in outlying areas where there is only one branch. The banks are also seeking an unofficial pre-ruling from the Bank of Israel in the matter; they are submitting an official request only after getting an indication that there is no problem about closing down the branch.
Movement for Freedom of Information executive director Nirit Blayer said today, "Bank branches are disappearing from the scene one after another. The pursuit of personal and human banking caused one of the movement's volunteers to ask the Bank of Israel to reveal to the public the number of requests by the banks to close down it had approved in recent years. The one-sided results give the impression that the public interest is again coming second to the interest of the bank owners, with the Bank of Israel approving almost all of the requests."
Many branches closed down in Tel Aviv
In the data it provided, the Bank of Israel also cited its criteria for approving or refusing requests to close branches. The first criterion is the presence of an alternative branch within three kilometers of the branch in the request. "The Banking Supervision Department emphasizes other aspects, including the branch's surroundings, and the characteristics of the branch's customers," the Bank of Israel wrote in a letter. For example, the Bank of Israel examines the proportion of customers over 70 at the branch for a which a closure request is submitted.
The figures show that 263 bank branches have been closed in Israel since the beginning of 2012. The trend has gained momentum over the years, reaching a peak in 2016, when 69 branches were closed down. The trend has since slowed; 46 branches were closed down in 2017, and only two branches in 2018. At the same time, most of the closures take place in the final months of the year, so the current figure for 2018 is misleading. The banks predict that the pace of bank branch closures will continue to slow, with a total of 30 branches closing down in 2018. Most streamlining in the banks currently focuses on cost-cutting within branches - cutting down on space and closing teller positions, which frequently results in customer complaints.
The figures provided to the Movement for Freedom of Information by the Bank of Israel give a glimpse of various features of the process of closing down branches. For example, 60% of the branches closed down were in the central region, of which more than half were in Tel Aviv. On the other hand, less than 7% of the branches closed down were in the southern region, and 17.5% were in the Haifa and northern regions.
The Bank of Israel's figures include a complete list of the branches closed in each year since 2012. These figures indicate that an absolute majority of the branches closed in 2013 belonged to the two largest banks - Bank Hapoalim (TASE: POLI) and Bank Leumi (TASE: LUMI) - and the trend accelerated in 2015 and 2016. The trend moderated in 2017, especially at Bank Hapoalim, which substantially dropped the pace at which it closed down branches, after being the first bank to begin the process. The standout in 2017 was Bank Leumi, which closed over 20 branches during the year. Mizrahi Tefahot Bank (TASE:MZTF), on the other hand, closed almost no branches in recent years; the bank has adopted a strategy of human service, and the number of new branches that it opened in these years exceeded the number that it closed down. Mizrahi Tefahot Bank has set a target of 200 branches in the coming years, which is likely to make it the second largest bank in Israel in terms of numbers of branches.
The trend towards closing down branches is accompanied by an increasing switch to the use of technological means of conducting bank transactions, with banks charging a smaller fee for a transaction conducted through a direct channel than one conducted through a bank employee in person. At the same time, this trend, which is also typical of other developed countries around the world, comes at a price. There are quite a few customers, especially in the older age brackets, who experience trouble with the transition to technological channels. Closing down branches and teller stands has also aroused quite a lot of protest by customers, and the issue has reached the Knesset agenda.
Published by Globes [online], Israel business news - www.globes-online.com - on May 3, 2018
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