State regulator calls for more competition as large banks cash in on high loan fees

Banking supervisor Daniel Hahiashvili says more competition is needed between banks as lenders rake in massive profits fueled by high interest rates and costly fees levied on an increasingly debt-burdened public during war.

“The high interest rate environment continues to have an impact on the profitability of the country’s banks this year…they have been enjoying high profitability over the past three years, which raises questions about competition,” the regulator says at a press conference in Tel Aviv. “For profitability to moderate, competition and the entry of new players is the key.”

The country’s banking system is largely controlled by five large banks, which have been accused of profiteering from the fruits of high interest rates on loans and mortgages, while households and businesses have been struggling to make repayments, the cost of living continues to rise, and the economy takes a toll during the war period.

Hahiashvili says the Bank of Israel is constantly seeking to improve the level of fairness and trust in the banking system by increasing data transparency on banking services, to provide comparison tools for example on bank fees.

“In the coming year, we will continue to examine bank fees, and consider additional steps to increase the level of fairness,” says Hahiashvili. “We are working on a licensing framework to remove barriers to allow the entry of new players within and outside the banking system.”

“The emerging framework is expected to increase the number of players and increase competition, which in turn will force current players to improve the level of services and to lower prices,” he adds.