Supervisor of Banks Hedva Ber today attacked the salary packages for senior banking executives, saying that their enormous salaries were undermining public trust in the banks.
"Salary norms have a negative effect on public trust in the banks," Ber said at a Bank of Israel Banking Supervision Department "Technology is Changing the Face of Banking" conference. "The Banking Supervision Department has been taking action in this area, and bank chairmen's salaries are slated to be cut during the coming year, following an instruction issued by the Banking Supervision Department six months ago. In addition, with the Bank of Israel's support, legislators are promoting a bill reflecting their concept of the proper remuneration for financial sector senior executives. Of course, remuneration must be directly connected to business results and the difficulty of the activity."
After Minister of Finance Moshe Kahlon predicted, "In 10 years, there will be no banks" due to technological progress," Ber took a swipe at him by describing how she though banks would look in the future. "What will the banks look like in 10 years? They will be different - more technology, more competition, and more efficiency. Adoption of technologies and innovation will enable the banks to provide more diverse services to customers at a lower price, with more transparency. The customer will be able to consume some of the services from non-bank entities, in which he keeps his current account. The new infrastructure and technological tools will lead to non-bank groups and FinTech companies specializing in specific niches of financial services and products operating next to the banks. Some are expected to work in cooperation with the banks, while others will compete with the banks and take away some of their revenue."
Ber also spoke about technological development and its effect on the banks, saying, "We expect to see a significant change in the banking system in the coming years as a result of the assimilation of new financial service technologies. The technology will enhance transparency for customers, who will know how much they are paying and how to compare prices between the banks. It will improve and expand banking goods and services, strengthen competition, and facilitate, or even require, streamlining of the banking system for the customer's benefit."
Despite the risks incurred in assimilating new technologies, the Banking Supervision Department is determined to allow the banking system to undergo a technological revolution, and even to provides incentives for it. The Banking Supervision Department's goal is to promote sustainable banking that will provide value for bank customers in terms of good service with added value, at lower cost, and with transparency. The entry of new technologies into the banking system will make this possible. These technologies will change the face of banking in the coming years. In recent months, we have been working simultaneously on a number of new policy instructions, some of which have already been published, and some to be published soon. These instructions will support changes in the banking system, and will even lead these changes."
Among other things, Ber was referring to instructions requiring the banks to adopt substantial streamlining plans, operate mobile branches, adopt a policy of providing service for all customers (including those who feel uncomfortable with the digital tools), and remove supervisory restrictions on a direct interface between the bank and the customers.
Published by Globes [online], Israel business news - www.globes-online.com - on March 3, 2016
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