Governor of Israel Ban: Fairness in interest rates - Banks: Our independence is important

The governor of the Bank of Israel, Prof. Amir Yaron, on Tuesday, summoned the CEOs of the banks in Israel to a meeting on the issue of interest rates on deposits and loans. The conversation that took place in the governor's office was relatively relaxed, but it can be called a "mild reprimand conversation", in which the governor criticized a lack of sensitivity towards the middle-class populations mainly those who pay high-interest rates on loans and when they have money in deposits and current accounts receive low interest, if at all, in an improbable manner of difference from the interest they pay.
However, the governor did not threaten any practical steps he would take if the banks did not change the current situation, nor did he specifically order what the banks should change. At the same time, the seven bank managers who were present at the meeting expressed reservations about the serious things said about the governor in recent days, which are seen by at least some of them as a violation of the independence of the banks, and called for the independence of the banking corporations, alongside that of the central bank, to allow competition in the system.
In a statement issued by the Bank of Israel after the meeting, it is claimed that the governor said at the meeting that "the banking system is robust and profitable. Recently, the system has recorded very high profitability and a sharp increase in the return on capital, among other things, as a result of a combination of several factors: current account balances that remain high, which are a source zero cost for setting up credit; Inadequate transfer of interest to deposits in the household sector and a high concentration of variable interest credit whose income increases with the rise in interest rates in the economy.
"It is essential that the banks know how to find the balance that reflects the value of fairness, between the policy of interest on loans and the policy of interest on deposits and managing the current account - with an emphasis on households and small businesses," added the governor.
The outgoing supervisor of the banks, Yair Avidan, also said at the meeting that "the supervision of the banks and the banking system place a lot of emphasis on the fairness of the system towards its customers. The objectives stated today in the discussion constitute another step to improve the fairness of the system for the various products and services. significant with the relevant customers and are a continuation of the customer concept at the center. It is important to note that customers also have tools for comparing and improving their conditions that we have promoted in recent years, and I urge them to continue using them."
A week ago, a special discussion was held in the Finance Committee of the Knesset regarding the meager interest payments that the banks pay to customers on the various savings assets, primarily the shekel deposits, at the same time as collecting very high interest on loans, which have resulted in record profits for the banks in recent quarters.
The commissioner of competition, attorney Michal Cohen, is the one who reported the figures to the finance committee and emphasized that this is "a market with characteristics of a concentration group".
The competition authority's inspection shows that if the banks had paid households the interest they pay private banking customers, it would have been more than four billion additional shekels a year that would have reached the public, and this without taking into account the fact that households deposit the funds for a longer period.
According to the findings of the Authority's inspection, this is a market that is apparently characterized by a low level of competition, in which the banks rarely compete aggressively for customers of other banks. It also shows that the deposits of households and tiny and small businesses are only about 64% of the deposit balances that the banking system holds, but they are responsible for about 77% of the banks' income from the margin from deposit activities.