Photo Credit: Yonatan Sindel/Flash90
Michal Cohen, head of the Economic Competition Authority testifying before the Knesset Finance Committee.

Attorney Michal Cohen, head of the Economic Competition Authority, on Thursday, told the annual Economic Competition Law conference at the Center for Law and Technology at the University of Haifa that “bank supervision in Israel is not suitable for our time and is a barrier to competition,” and “the supervision is designed entirely to serve the needs of the old financial structure.”

Cohen noted that although the government is trying to act in the interest of the customer and of competition, the outcome “does not allow the competition we want to see.” She quipped: “The situation that was created here is regulatory spaghetti.”

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The Competition Authority (previously the Antitrust Authority) is a government agency entrusted with preserving the principles of competition in Israel’s economy. The Authority was established in 1994 and operates under the Economic Competition Law of 5748-1988, which aims to decrease the regulatory burden for legitimate and efficient practices while strengthening enforcement against anticompetitive conduct.

Attorney Cohen stressed the importance of financial supervision of non-bank entities in contributing to market competition.

“The supervision of the non-banking entities should be reduced and adapted to international standards,” she added, “but it is important that it exists. We think that in this case, supervision is an essential element to facilitate competition – not necessarily so that more entities can enter the market, but mainly to create a positive reputation for the non-banking entities. The non-banking entities need to connect to the Bank of Israel’s systems, so they must have a good reputation with the regulator as well; this is an essential prerequisite to allow competition to thrive here.”

According to Cohen, as part of increasing competition, one should strive for a situation whereby the public manages its financial assets in several different entities, where individuals are free to choose a different service from each entity, which is in contrast to the situation today, whereby most people manage most of their assets in the same bank where they keep their checking account – a situation that results in serious financial losses to customers.

“We want to have one supervisor for the non-banking entities and one for all the banks because we don’t think that the same supervisor who monitors the banks should also cover the non-banking entities,” Cohen said, “Because the DNA of the supervisor of the banks favors stability and limiting risk, while entities outside the banks don’t require the heavy regulation of banks.”

“Here, too, we want to apply international standards to facilitate competition,” she concluded. “There should be a twinning mechanism between the supervisors because the absence of coordination is likely to harm competition. In the end, we want non-banking institutions to be competitive in the eyes of the consumer so that a loan from a non-banking financial entity would be seen by the consumer as similar, so the consumer won’t continue to go to banks and not open themselves up to the non-banks.”


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David writes news at JewishPress.com.