The Israel Competition Authority on Wednesday declared the country’s five major banks a “concentration group,” giving it the authority to impose directives or restrictions on their activities.

The Competition Authority can declare a “concentration group,” often referred to as an oligopoly or shared monopoly, when a limited number of parties together hold more than a 50% share of a specific market and exhibit minimal competition among themselves.

The Bank of Israel responded by branding the measure an “extreme and disproportionate step” that may cripple investments from abroad while at the same time result in no improvement for local customers.

According to Israeli law, the Israel Competition Authority must consult with the BoI before imposing any measure on the banks, but it is not required to heed the central bank’s advice.

The BoI said that it had already led a cross-the-board reform for the five major banks—Hapoalim, Leumi, Mizrahi Tefahot, Discount and First International—making the Competition Authority’s declaration “merely a declarative move that harms regulatory certainty in the Israeli economy … without generating any competitive benefit.”

The Bank of Israel added that formal discussions have taken place between its Banking Supervision Department and the Israel Competition Authority.

In these discussions, “the authority did not present a convincing basis showing that the contemplated directives are expected to yield competitive benefits exceeding their costs, or that their risks and systemic implications were thoroughly considered,” the BoI said, adding that coupled with measures already advanced by the Bank of Israel, “it is difficult to justify the use of such an exceptional tool as declaring a concentration group.”

According to financial outlet Globes, the authority’s declaration was accompanied with a series of restrictions imposed on the banks by Competition Commissioner Michal Cohen, set to take effect in May 2027.

Among these, discrimination in deposit pricing will be prohibited and banks will be required to ensure transparency, the report continued.

According to the authority, different bank customers receive today different interest rates on deposits, while less engaged customers receive worse rates. Meaning, the interest rate publicized by the bank does not reflect the rates the bank actually grants on deposits, Globes cited the authority as saying.

The new directive will make price comparisons easier and reduces barriers to changing banks, the report added.

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