Israel's banks are now awaiting the outcome of a bill introduced yesterday at a session of the Knesset Economics Committee by MKs Orit Noked (Labor), and Amnon Cohen (Shas), which would require them to pay interest on current accounts in credit. The Bank of Israel has agreed to a request from committee chairman, MK Gilad Erdan (Likud), to instruct banks to create a mechanism for notifying customers whose accounts are in credit and suggesting that they transfer their money into interest-bearing short-term deposits.
"The bill, in its current format, could pose a barrier to new banks from overseas interested in entering the Israeli market. The right solution, which will be beneficial for both customers and competition, is to obligate the banks to suggest to customers whose accounts are in credit that they invest their money in savings and earn interest on them," said Erdan.
The banks are now waiting for the Bank of Israel to come up with a solution. Should no solution, either in the form of voluntary agreement or a Bank of Israel directive, be found, the bill will be introduced in the Knesset's winter session and voted on by the committee. Should it be passed into law, the proposal will cost an estimated NIS 200 million, assuming that the interest rate on accounts in credit is set at 0.5%.
Association of Banks executive director Moshe Perl said that there was no call for symmetry between interest on accounts in debit and those in credit. "Every bank has alternatives. Any customer in credit has a number of short-term deposit arrangements to choose from," he insisted.
Noked, one of the two MKs sponsoring the bill described the current situation as incongruous. "On the one hand, the banks charge us when we're overdrawn, but they don't pay when we're in credit. Israel's banks are the only ones which, for some reason, are incapable of bringing themselves to pay daily interest on accounts in credit, and complain about harming competition," she said.
Published by Globes [online], Israel business news - www.globes.co.il - on July 26, 2007
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