Competition in the Israeli Banking System
Competition in the Israeli Banking System
In June 2015, Mr. Dror Strum, IEP's CEO, was appointed as the Head of the Committee for Increasing Competition in the Israeli Banking and Financial services. The members of the Committee were all governmental agencies, including the Bank of Israel, Ministry of Finance, and the Competition Authority. The Committee's recommendations led to a structural reform and were published in September 2016 and adopted by the Knesset in the Increasing Competition and Reducing Concentration in the Banking Market Law, enacted in 2017 (also known as the Strum legislation). The recommendations were published and are available on the web. The main consequence of the Committee's recommendations is the structural separation of Credit Cards companies from the large banks and removal of barriers to the entry of new banks to the Israeli arena, thus promoting competition in the household and small business sectors, which suffer from high prices (relatively to other sectors). This also enabled integrators into the credit card industry, which led to reduction in the high commissions paid by SMEs. In addition, the legislation provides the framework for new competitors including Fintech companies, Cooperative associations etc. Pursuant to this legislation, the banking and credit card markets are undergoing numerous and extensive changes: there has been a decrease in credit card fees, a new digital bank is being established for the first time in the past 48 years, the credit card companies have been separated from the big banks (Poalim and Leumi), Fintech companies and network brokers obtained licenses to operate in the Israeli market, and there have been changes in the structure of the system for providing financial services and the ability to compare financial costs. All these changes are likely to increase the competition in the provision of credit starting in 2021-2022.
In June 2015, Mr. Dror Strum, IEP's CEO, was appointed as the Head of the Committee for Increasing Competition in the Israeli Banking and Financial services. The members of the Committee were all governmental agencies, including the Bank of Israel, Ministry of Finance, and the Competition Authority. The Committee's recommendations led to a structural reform and were published in September 2016 and adopted by the Knesset in the Increasing Competition and Reducing Concentration in the Banking Market Law, enacted in 2017 (also known as the Strum legislation). The recommendations were published and are available on the web. The main consequence of the Committee's recommendations is the structural separation of Credit Cards companies from the large banks and removal of barriers to the entry of new banks to the Israeli arena, thus promoting competition in the household and small business sectors, which suffer from high prices (relatively to other sectors). This also enabled integrators into the credit card industry, which led to reduction in the high commissions paid by SMEs. In addition, the legislation provides the framework for new competitors including Fintech companies, Cooperative associations etc. Pursuant to this legislation, the banking and credit card markets are undergoing numerous and extensive changes: there has been a decrease in credit card fees, a new digital bank is being established for the first time in the past 48 years, the credit card companies have been separated from the big banks (Poalim and Leumi), Fintech companies and network brokers obtained licenses to operate in the Israeli market, and there have been changes in the structure of the system for providing financial services and the ability to compare financial costs. All these changes are likely to increase the competition in the provision of credit starting in 2021-2022.
