BoI: Instant bank swapping will cover 80% of accounts

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The Bank of Israel estimates that almost all private bank accounts can be switched to another bank at the push of a button.

The Bank of Israel Banking Supervision Department this week published the types of bank accounts that can be switched to a different bank using the new account switching system that the banks are to establish. The list of accounts is believed to include 80% of all existing bank accounts. The accounts in question are those belonging to households or small businesses registered under their owners' ID card numbers. Business accounts are not yet included in the project, but may be added to it at a later date.

The document shows that in practice, all of the accounts in the new system can be switched except for those that cannot be automatically switched for legal reasons; for example, a trustee account or an account managed by a legal guardian cannot be switched automatically to another bank. Accounts of people in bankruptcy or receivership proceedings also cannot be switched. On the other hand, an account with bounced checks can be switched, but the information about the bounced checks will be transferred to the new account.

The Bank of Israel document also refers to the question of the account owners. For example, if an individual account owner wants to switch to another bank to an account in which he or she is only one of the beneficiaries (for example, someone opening a joint account after getting married), they can do this. On the other hand, an account belonging to multiple owners cannot be automatically transferred to an account in which only one of them is a beneficiary, in order to avoid problems involving the division of property.

The purpose of this document is to define the reach of the account switching system, so that work can begin on the technical part of writing specifications for the system. The Banking Supervision Department wants to complete the next stage by the end of the year and publish the list of activities in an account that can be automatically switched to the new bank. The system will then move to the technological development stage.

The system for moving accounts was initiated by the Ministry of Finance in cooperation with the Bank of Israel, and was arranged through legislation.

The banks are legally required to establish such a system in order to facilitate the process of moving accounts from one bank to another. The system makes it possible to move current accounts at the push of a button, with no need for approval or any action by the customer's old bank. The cost of setting up the system, which the banks will have to pay, is believed to be in the hundreds of millions of shekels.

The banks are not happy about the project, claiming that it is expensive and difficult to set up and will not lead to an increase in customers switching banks. This assessment is based on experience with a similar system in the UK, which did not result in increased switching between banks. The Ministry of Finance and the Bank of Israel, however, believe that the system will generate a competitive threat to the banks and make them work harder in order to avoid losing customers.

Published by Globes, Israel business news - en.globes.co.il - on November 1, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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bank  image: thinkstock
bank image: thinkstock
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