Yaron Amir targets increased banking competition

Amir Yaron Photo: PR

While Karnit Flug preferred dealing with monetary and fiscal matters, employment and productivity, the new Bank of Israel Governor is focused more on the banks.

Governor of the Bank of Israel Prof. Amir Yaron intends to become more involved in matters pertaining to the financial system, particularly banking. Banking sector sources say that only three months after entering his position, his presence is palpable in anything having to do with banking, above all in increasing competition between the banks.

During her term as governor Dr. Karnit Flug preferred dealing with monetary and fiscal matters, as well as issues such as the labor market and productivity. Flug left regular supervision of the banking system to Supervisor of Banks Dr. Hedva Ber. Other subjects, such as the credit database, were assigned to Deputy Governor of the Bank of Israel Dr. Nadine Baudet-Trajtenberg.

Yaron, on the other hand, appears to have a different attitude. He is concerned about the banking system in general and competition in particular, and wants to be involved in it. He previously stated that he was very interested in the credit database, and was considering expanding it to companies and small businesses. He mentioned another subject at a press conference this week - credit securitization - as something that the Bank of Israel was planning to promote in the near future. Sources who worked closely with the new governor said, "Yaron is a man of finance and is deeply involved in the financial world, certainly more than Flug, and perhaps more than any previous governor. He is interested in the entire financial system and the financial intermediation sector, and it is obvious that the banks play the leading role in this context."

The Supervisor of Banks is satisfied with competition

Yaron regards adoption of technological innovations in the financial system as one of the three main topics during his term (together with economic advice to the government and managing monetary policy). The banks' payment applications are one example of this. Bank Hapoalim, Bank Leumi, and Israel Discount Bank have payment applications that they want to put into businesses. The credit card companies, especially Max (formerly Leumi Card), which has already been separated from Bank Leumi, oppose this, and are demanding that restrictions be imposed on the banks. The credit card companies assert that aggressive action by the banks in this area will have a negative impact on their clearance activity, and make it difficult for them to become strong and independent concerns. As far as is known, the Supervisor of Banks does intend to impose restrictions on this activity by the banks (on the turnover that can be cleared), but Yaron also has something to say about it, and the matter is currently awaiting his decision.

The Bank of Israel Banking Supervision Department held its annual conference yesterday. Yaron appeared there and spoke at considerable length about competition in the banking system. He mentioned that there were matters that should be promoted in order to improve competition. Among other things, he talked about the need to encourage the entry of fintech players and reduce regulatory uncertainty for them. He also commented on the streamlining measures taken by the banks in recent years, saying, "Our job as regulators of the market is to make sure, as the Banking Supervision Department is doing, that the banks pass on the benefits of streamlining to the general public."

Ber followed Yaron on the speakers' platform. She listed the Banking Supervision Department's achievements during her term in enhancing competition in the banking system. Among other things, she mentioned the separation of the credit card companies from the large banks and the establishment of a credit database.

Ber also presented a survey showing that the public is already less worried about competition in the banking system. The survey was conducted shortly after elections were announced, and the findings were compared with another survey conducted after elections were announced in 2015. Ber boasted that while 21% of the respondents in 2015 said that extremely urgent measures were needed to improve competition in the banking system, this proportion fell to just 6% in the more recent survey. "According to the survey, it appears that the public no longer thinks that intensive intervention in banking is required. The public already feels the change we made in recent years," she said, perhaps seeking thereby to deliver a message to Yaron.

Difficult relations between the Banking Supervision Department and the Ministry of Finance

Ber has been Supervisor of Banks for the past three years. Her term has been quite turbulent - she entered her position at a difficult time, shortly before Moshe Kahlon became Minister of Finance. Kahlon emphasized increasing competition in the banking system, and appointed the Committee on Increasing Competition in Banking and Financial Services (the Strum Committee) for this purpose. Relations between the Ministry of Finance and the Bank of Israel were difficult throughout Kahlon's term, with ups and downs. Ber had to maneuver between the various pressures. She instituted quite a few changes in the Banking Supervision Department to adapt it to the mood of the public, which demanded more competition, and lead a series of measures for improving competition in banking.

The main disagreements between the Ministry of Finance and the Bank of Israel were reflected on the Strum Committee, which had members from both sides. Tension reached a peak when Ber angrily left a Knesset session at which the Promotion of Competition and Reduction of Concentration bill was due to be passed.

Ber also faced a Knesset with a militant attitude towards the banking system. Many bills concerning banks were introduced during the past Knesset, some of which the Bank of Israel opposed and some of which it accepted. MKs also criticized the Bank of Israel for in effect serving the banks' interests. Dror Strum, who chaired the Committee on Increasing Competition in Banking and Financial Services and wrote the law separating the credit card companies from the banks for Kahlon, yesterday defended the Bank of Israel. At the Banking Supervision Department conference, Strum said, "After two intense years of working with the Bank of Israel, I can say that this is not true; the Bank of Israel does not serve the interests of the banks."

Published by Globes, Israel business news - en.globes.co.il - on April 4, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Amir Yaron Photo: PR
Amir Yaron Photo: PR
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