Kahlon to target more competitive banking

Moshe Kahlon  pohoto: Tamat Matzapi

The Kulanu Party leader and likely Minister of Finance believes that only competition can cut banking costs.

After housing, banking is the main economic issue on which Kulanu Party leader and likely next Minister of Finance Moshe Kahlon focused in the run-up to the elections. Kulanu's platform and proposals for changes in banking were the most detailed and serious of all the parties. In the tension between supervision and competition, Kahlon leans heavily towards the latter. He believes that action should be taken to bolster competition between the banks, and that this is the only way to achieve a substantial drop in costs for consumers.

Kahlon believes that in the long term, competition will only strengthen the banks, increase their profitability, and reduce the "too big to fail" risk. He frequently uses an example from his period as Minister of Communications - how he was right when he rejected the proposal by the owners of the cellular companies for a price cut, and insisted on real competition.

As stated in "Globes" before the elections, Kahlon is confident of his ability to carry out a revolution in banking similar to the one he brought about in the cellular sector, although his task this time will be much harder. Some of Kahlon's proposals have already been circulating in the Ministry of Finance corridors, and he can be expected to find a willing partner for his agenda among the Ministry's professional echelon.

The Bank of Israel, on the other hand, can be expected to be a much more skeptical, not to mention contrary, partner. The Bank of Israel and its head, Governor Karnit Flug, continue to stress stability in the banking system at the cost of promoting competition within it. In this context, quite a bit of criticism of outgoing Supervisor of Banks David Zaken's performance in office has been heard from Kahlon's entourage, which has accused Zaken of neglecting competition between the banks.

The Bank of Israel's attitude, as recently expressed by Flug in a "Globes" interview, is that only the entry of large and sound players into the market, such as foreign banks, can bring about healthy competition that will not jeopardize the banking system's stability. The main measures advocated by Kahlon are excluding the banks from ownership of the credit card companies, liquidation of the banking groups and forcing the major banks to sell holdings in the smaller banks, introducing concessions and incentives for new players, introducing government insurance for bank deposits (with an emphasis on small banks), and creating a super-regulator to promote competition in the financial sector.

Published by Globes [online], Israel business news - www.globes-online.com - on March 18, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

Moshe Kahlon  pohoto: Tamat Matzapi
Moshe Kahlon pohoto: Tamat Matzapi
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