Supervisor of Banks David Zaken is increasing the banks' transparency on fees on securities transactions. The Bank of Israel has published the Proper Conduct of Banking Business Directive 414, which requires banks to provide customers making transactions in securities with a table showing the fees paid by other customers making similar transactions. The directive, which applies to small businesses and individuals, will take effect on January 1, 2015.
Zaken created nine categories of securities portfolios; the lowest is up to NIS 25,000, and the highest is more than NIS 1 million. For each category, the banks must state the buy and sell fees for stocks, bonds, makams, and foreign securities. The banks will also disclose management fees for Israeli and foreign securities, but do not have to disclose fees for options, because this is not a regular activity by small businesses and individuals. The banks will provide information to customers every six months, allowing them to see the fees charged them and how they compare with fees charged to comparable customers.
"The objective of this measure is to increase the transparency of the banking corporations toward their customers. This price transparency could also contribute to increase competition and to improving the bargaining power of customers, mainly households and small businesses, vis-à-vis the banking corporations in this area," says Zaken.
The reason for the directive is the large gap between the price list fee and the fee that is actually collected on transactions in securities, which makes it difficult for the customer to compare prices. The difference results in many customers mistakenly believing that they are getting a good price, because they are being charged less than the list price for services, whereas in fact they are paying above the average fee actually charged by the bank.
Published by Globes [online], Israel business news - www.globes-online.com - on April 3, 2014
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