Banks make their services more expensive to their smallest clients because they can.
By JERUSALEM POST STAFFbank fee biz 88 224(photo credit: Ariel Jerozolimski)
The latest Cost of Living Index underscores what most Israelis intuitively know - prices are going up and inflation is back. We are paying roughly 5 percent more for purchases, so far this year, than we did in 2007.
The slowdown in Israel's economic growth is also getting worse. The Integrated Index published yesterday by the Bank of Israel to measure economic activity dropped in July by a significant 0.3 percent. ECONOMICS has been called the dismal science, but nothing is more dispiriting than an economic reform gone awry. The Knesset empowered regulators at the Bank of Israel to encourage the banks to modify their ubiquitous fees. This the banks did last month.
In a very few weeks these reforms have managed to make a bad situation worse, driving up bank fees by a whopping 16.2%.
The original idea was to scrap the fees on scores of routine transactions, saving households and small businesses from being "nickled and dimed" to the tune of millions of shekels. By some reckonings, 180 fees out of a total of 305 were done away with; others calculate that of the 198 most frequently charged fees, only 72 now remain. Consumers looked forward to a lightening of their ridiculous, irritating fee burden.
The banks, however, outsmarted the regulatory authority. Anticipating a reduction in the number and variety of imposed bank fees, they substantially hiked those fees they were entitled to collect, raising them for the most commonly used services.
It now costs as much as five times more to have a salary or pension deposited in one's account; to deposit or cash a check, withdraw money or use bank cards.
Most conspicuous is the teller fee. Any time clients show up in their branch, stand on line and seek to involve the bank's personnel in the most routine of tasks, they are essentially fined for not resorting to automated alternatives. Such fees range between NIS 5.5 to NIS 7 per transaction, depending on a given bank's whims.
Some banks are cheaper, but before you rush to switch - still not a simple transition in Israel - take into account that while given banks charge a fraction less for some fees, they are costlier on others.
Predictably, the expense is borne chiefly by the less affluent or elderly, who are leery of impersonal banking or unable to do their banking on-line or electronically. Anyway, even using an ATM has become pricier. Some banks now charge NIS 2.50 per ATM transaction.
Bank of Israel supervisors say they will only be able to evaluate the impact of the fee reforms when the October data comes in. But it's already obvious to many of us that we are paying more, particularly if we do our banking at the local branch.
BANKS are not known for their magnanimity to customers. They make their services more expensive to their smallest clients because they can.
Four years ago, the Israel Antitrust Authority launched an ongoing investigation into suspicions that banks were coordinating their fees, making it impossible for their clientele to shop around.
Those of us who pay exorbitant interest when we borrow, but get risible rates on our savings; who read about soaring salaries bank chiefs award themselves even when the banks are not doing all that well, inevitably conclude that we are being fleeced.
Free enterprise isn't synonymous with anything goes. Excessive regulatory control may be unhealthy, but so are monopolies. Both sap capitalist initiative and obstruct competition, the market's life-blood.
We do not begrudge banks making their money. What we object to is blatant profiteering - which can contribute to inflation; and to the breaking of antitrust laws by fixing charges for fees and services, as the banks have been accused of doing. Their actions could destabilize the economy.
The banks need to rein themselves in, otherwise their greed and insensitivity will trigger legislation authorizing tighter controls. Should that happen, they will have no one to blame but themselves - because they didn't know when enough is enough.
