Interest rates

Regulator wants more transparency on bank interest rates

One of the well-kept secrets of the banking system, the interest rate applied to loans, will it be made public so that people can compare the different offers of the banks? Banking supervisor Yair Avidan decided to take action following criticism of banks in recent weeks for not increasing the interest they pay on deposits in direct proportion to the Bank of Israel’s rate hike as they rushed to raise interest rates on loans. The Bank of Israel has also been criticized for not requiring banks to raise interest rates on deposits accordingly.

This morning, Avidan wrote to the CEOs of banks and credit card companies indicating its intention to take steps to have banks publish the interest rates they pay on shekel deposits and the interest charged for credit. . The aim is to give customers a simple tool that will help them easily compare the conditions offered by different banks and choose the product that suits them best.

“In recent years, due to the near-zero interest rate environment, bank deposit products were not an important investment option for customers, and therefore activity in these products fell and large balances have been left in current accounts which generally do not bear interest In light of the changing interest rate environment and inflation, the Directorate of Banking Supervision expects banks to they make their customers aware of the investment banking products in which they can deposit their money and invite their customers to consider whether these meet their needs,” Avidan wrote to the heads of the banking system.

He added that banks should give customers a full picture of the terms of their products, including the conditions for breaking a deposit when a customer wants to withdraw money before the agreed exit point.

Banks have always maintained that it is not possible to publish a uniform rate for loans, since rates vary from case to case depending on the client’s risk profile and other criteria.

Following recent criticism, three banks, Discount, Leumi and Mizrahi Tefahot, announced some improvement in the interest rates on deposits they offer to customers. Nevertheless, given the expectation that the Bank of Israel will continue to raise its rate (which currently stands at 2%) in the coming months, and that it may exceed 3%, no real risk arises for the banks for their “generosity”.

In his letter, Avidan wrote that he expected banks to protect the interests of their customers in the face of changing interest rates and inflation and to adapt their products and services to the needs of customers. . He mentioned the reform aimed at increasing the transparency of the mortgage market which came into force at the end of August, obliging banks to present conditions for three identical mortgage tracks, and being able to present an additional track at their convenience.

Published by Globes, Israel business news – en.globes.co.il – on September 7, 2022.

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