After marathon meetings, the Strum Committee bill for increasing competition in the banking system was enacted by the Knesset this morning after passing its second and third reading.
The Israel banking bill is based on the recommendation of the Strum Committee for Increasing Competition in Banking and Financial Systems, established 18 months ago by Minister of Finance Moshe Kahlon and the Bank of Israel, and headed by former Antitrust Authority director-general Adv. Dror Strum.
The main item in this bill is the separation of credit cards companies from banks within 3 years, based on estimates that they would be able to facilitate fair competition in the banking market for households. In addition, the bill relates to removing obstacles for the entry of new competitors and provides formative protection for new and small financial entities.
As part of the discussions of the reform committee, substantial changes had been made and new topics, not detailed in the original bill, had been introduced. These include encouraging the operation of a credit card clearing consortium, initiated by MK Erel Margalit, aimed at reducing clearing fees for small businesses; enabling a second lien for an asset; establishing a price comparison engine; use of data by credit companies; and, adjustments made in the bill, including the market share of credit card companies and decreasing bank holdings in Automated Banking Services Ltd. (Shva).
Reform Committee Chairman MK Eli Cohen said, "This is one of the most important reforms, if not the most important reform, to be approved by the 20th Knesset. Legislation to increase competition in the banking system has an historic significance since, in 47 years, no new bank has been founded in Israel. Developing a competitive banking system is vital to economic growth and to the stability of the banking system. Opening Israel's highly concentrated financial sector is important for the increasing of competition in the banking system and will be directly beneficial for bank customers, who will turn from captive customers into sought-after customers."
After marathon meetings that continued into the night yesterday, the Knesset's Reform Committee started another hearing this morning in order to settle disputes and vote on the Strum Committee Law.
At the beginning of the meeting, Bank of Israel Governor Dr. Karnit Flug tried to convince Knesset member to support the Bank of Israel's stand on the last remaining disputes. "I came here today, at the last moment before the vote, to say a few things," Flug said.
"There are a few reservations that have not all been reviewed thoroughly enough, and some of them could do more harm than good - I of course refer to harm to the public. It is important to explain that it will eventually be the Bank of Israel that will be responsible to implement most reform items and therefore it is important for the Bank of Israel to lead, together with the Ministry of Finance and Ministry of Justice, the formation of regulation in the various fields," Flug said.
Flug referred, among other things, to intentions to provide a read only access to bank client data for term comparison with competing banks. Flug asked to exclude comparison of loan interests from these comparison mechanisms.
"Adding input on credit frame interest to financial data sharing will serve exactly the same end as the Credit Data Law, which is to result in increasingly competitive credit market. It is clear that adding this information would negatively affect the realization of Credit Data Law goals; this was noted yesterday by both deputy attorney general and the committee's legal counsel," said Flug.
Flug also remarked on the way the Bank of Israel was treated during some of the committee's hearings, and protested the harsh words levelled at the bank's representatives. "The Bank of Israel's employees are public servants coming here to present their professional opinion in order to contribute to the legislation process, and thereby contribute to making the bills passed by you into better laws, for the benefit of the public.
"Lashing out at them, when they say things you do not want to hear, insulting and offensive words, raising your voice - all of this has not deterred them, but could eventually deter excellent professionals from coming here and telling you what they, as professionals, consider to be the truth. This will certainly not improve enacted laws, and does not add respect to you or to the Knesset. Please take this into account," Flug said.
During discussions, which have reached a boiling point in the past few days, the Supervisor of Banks Hedva Ber left one of the hearings after MK Erel Margalit hurled at her that the Bank of Israel serves the banks and not the public.
A short time later, another conflict erupted between the Bank of Israel and Knesset members. During a dispute on whether the law should state that the Bank of Israel or the Securities Authority would impose sanctions on credit card clearing companies refusing to work with a credit card clearing consortium. During the dispute, MK Cohen said, "If the Bank of Israel continues living in a bubble and thinking that it is above the law, we will take away its responsibilities." The Bank of Israel representatives left the hearing in protest.
Published by Globes [online], Israel business news - www.globes-online.com - on December 14, 2016
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