Israel competition watchdog declares top banks an oligopoly, targets deposits |
Israel’s competition watchdog on Wednesday declared the country’s five largest banks an oligopoly, citing their dominance in retail banking services for households and small businesses.
The declaration grants Israel Competition Authority Commissioner Michal Cohen the authority to impose directives or restrictions on their activities to encourage fair competition and prevent harm to consumers.
The decision follows a lengthy investigation, which opened in 2023, to examine the lack of competition in the banking sector. The regulator decided to target the savings deposit market and impose new mandates to force more competitive and fair interest rates for consumers.
Israel’s concentrated banking system is controlled by the country’s five largest banks – Bank Hapoalim, Bank Leumi, Israel Discount Bank, Mizrahi Tefahot Bank and First International Bank of Israel – which have allowed them to rake in record profits in recent years and charge excessive fees with little fear of blowback. The banks have been accused of generating excessive profits from higher interest rates on loans, while not adequately sharing the benefits with customers.
“The declaration of the banks as a concentration group is an important step in transferring bargaining power to the public,” Cohen said. “The directives that will be imposed are intended to stop the behavior of banks that make it difficult to compare prices of banking services and switch to competing banks and financial institutions.”
“The directives will make the basket of banking services more diversified and prevent harm to competition,” he added.
An oligopoly occurs when a few large players hold a combined share of more than 50 percent of a specific market, which typically results in reduced competition. As of the end of 2024, Israel’s five largest banks together control about 98% of the banking sector’s assets, with the two largest groups, Leumi and Hapoalim, together holding about 48% of all assets, according to the competition........