The competition watchdog in Israel has requested additional information from the banks regarding an ongoing investigation. It has been noted that the banks are making significant profits from increased interest rates on loans, but it is unclear if customers are benefiting from these profits.
The investigation commenced in 2022 and was not disclosed until Sunday.
The Bank of Israel raised its benchmark interest rate by 25 basis points last week, marking its 10th consecutive increase. The current rate, which was 0.1% in April 2018, is now 4.75%, the highest since 2006. The move was made to control inflation.
“The fight against the cost of living tops our government’s list of national priorities,” Prime Minister Benjamin Netanyahu told a cabinet meeting on Sunday, adding he would set up and head a ministerial panel on the matter.
Mortgage and loan payments have increased due to their correlation with inflation and the central bank’s rate, resulting in record profits for banks and substantial dividends for shareholders, but also causing public discontent.
During the first quarter, the top five banks generated a combined profit of 6.3 billion shekels ($1.7 billion).
According to the Competition Authority, banks have not promptly passed on the advantages of increased rates to customer deposits.
Israel’s recent policy-tightening measures have led to increased frustration among its citizens due to rising mortgage, loan payments, and cost of living, while inflation remains at approximately 5%.
The Competition Authority initiated an investigation in 2022 as interest rates were increasing, and has requested additional data from banks based on preliminary findings. No information has been provided regarding potential disciplinary actions.
Yair Avidan, the supervisor of banks in Israel, addressed the issue of rate hikes and stated that 82% of them have been passed on to customers. However, he also mentioned that some customers are not aware of their options for interest-bearing accounts, and encouraged banks to educate their customers.