Israel’s government postponed on Wednesday a preliminary vote on a bill forcing banks in the country to pay interest on checking accounts after Bank of Israel Gov. Amir Yaron warned such a move would impend the central bank’s independence.
The bill, sponsored by Likud lawmaker Yinon Azoulay, would mandate banks to pay interest on checking accounts, with the finance minister holding the final authority on setting the minimum rate, not the Bank of Israel. A first draft of the bill was approved by the Ministerial Committee for Legislative Affairs on Monday. Azoulay said that after consulting with Prime Minister Benjamin Netanyahu, he had decided to postpone the preliminary vote on the bill by one week, to allow Israeli banks to voice with the Bank of Israel their position on the matter.
The issue of interest rates on checking accounts has been on the Israeli agenda for several weeks now, following publications mid-May of the financial reports of the five largest banks in Israel — Bank Hapoalim, Israel Discount Bank, Mizrahi-Tefahot Bank, First International Bank of Israel and Bank Leumi — for the first quarter of 2023. The reports showed unprecedented profits of the five banks, of more than 6 billion Israeli shekels ($1.62 billion) combined, mainly due to a series of hikes in the interest rates on loans, announced by the Bank of Israel. These reports drew criticism on banks making huge profits, while refusing to share profits with checking account clients.
Following public criticism, Bank Leumi decided June 13 to offer some of its checking account clients with positive balances 1% interest. These clients include employees with salaries who pay mortgages, clients who use credit of more than 3,000 shekels ($812) per month, clients receiving pensions and employees with salaries who also hold investment portfolio. Other banks are said to be considering similar moves, Ynet noted.
