© Reuters. FILE PHOTO: Former Jerusalem Mayor and Knesset member Nir Barkat speaks to reporters during an interview with Reuters at his home in Jerusalem, October 6, 2021. REUTERS/Nir Elias/File Photo
By Steven Scheer
JERUSALEM (Reuters) – Israel’s competition watchdog sought more data on Sunday from the country’s banks relating to an investigation, saying they were enjoying huge profits from higher interest rates on loans but weren’t adequately sharing the benefits with customers.
The investigation, which began in 2022, wasn’t made public prior to Sunday.
In a bid to rein in inflation, the Bank of Israel last week raised its benchmark interest rate by another 25 basis points to a 2006 high of 4.75%, its 10th straight hike of the key rate that stood at 0.1% last April.
“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, often tied to both inflation and the central bank’s rate, have in turn jumped. This has caused anger among the public even as it has meant record profits for banks and sizeable dividends for their shareholders.
The top five banks earned a combined profit of 6.3 billion shekels ($1.7 billion) in the first quarter.
Banks have been slow to pass on the benefits of higher rates to customer deposits, the Competition Authority said.
Israel’s aggressive policy-tightening cycle has sparked anger among its citizens as mortgage, loan payments and the cost of living have soared, with inflation staying around 5%.
The Competition Authority, formerly the anti-trust authority, said it had launched the investigation in 2022 when interest rates were starting to rise, and based on preliminarily results, it asked banks last week to provide more data. It declined to provide details on any possible disciplinary action.
Israel’s banking regulator has downplayed the issue. Yair Avidan, the supervisor of banks, last week told reporters that 82% of the rate hikes have been passed on to customers. Still, he said many customers were not aware they could open interest-bearing accounts, and urged banks to educate their customers.
Last week, Economy Minister Nir Barkat asked Competition Authority head Michal Cohen to step down, saying she was a main cause of higher prices in the economy since the authority had not confronted monopolies enough. Cohen has refused to resign.
Barkat said that the authority “must carry out this investigation intensively, quickly and efficiently, because until it is completed, the public will lose.”
($1 = 3.6280 shekels)