The Movement for Quality Government submitted a position paper to the committee for increasing competition in frequently used banking and financial services in Israel. In the position paper, the movement suggests solutions for basic market failures which are inherent in the existing structure of these sectors. Among the proposals raised by MQG: Forcing banks to give up ownership of credit card companies; Introducing internet banking services, cooperatives and credit unions to the market; Increasing use of alternative banking services, such as Israel Postal Company and major retail chains.
In the position paper submitted by MQG to the committee for increasing competition in frequently used banking and financial services, the movement offers solutions to inherent market failures existing in the Israeli market which present major problems in proper conduction and supervision of the Israeli banking system.
Among the main suggestions raised by MQG: Separating banking ownership from credit card companies and automated banking services; Applying insurance depositing in new and small banks and encouraging the establishment of internet and cooperative banks as well as credit unions. In addition, the movement suggests giving state guarantees to credit given to small banks and small businesses, alongside encouraging the use of banking services provided by the Israel Postal Company and major retail chains.
Furthermore, MQG proposes to build a new banking information system which will outsource its services and will be available through a regulated price. In addition, efficient access to all existing information systems must ensured for all new firms and is to be conducted in a neutral manner.
The movement also suggests supplemental steps which are required to reduce market barriers to promote competition, promoting legislative corrections of credit data services in order to advancing its technological infrastructure; Declaring major banks as a monopoly in order to encourage completion; improving the effectiveness of the governmental corporate systems in financial structures through limiting appointing, remuneration and senior positions of directors and board members.
The movement calls to examine the effectiveness of main controls in financial structures and to reorganize regulation of the banking sector in order to balance between bank stability and protection of the consumer; to demand the investment of part of the long term savings of the public; by the structures which finance retailer credit to households and small businesses.
To the movement viewpoint, the structure of the market, which features a frightening degree of concentration and lack of competition in the Israeli banking system is extremely concerning and imposes on the public its faulty conduct by developing surpluses and high expenses alongside allocating unfair credit which hurts the economic growth. MQG believes that the committee must fix this regulatory imbalance of the financial sector which prefers system stability considerations over aspiration to create a competitive and fair market and to balance these considerations. In order to do that, there should be two overlapping directions of operating: (1) to encourage the entering of new actors to the completion of providing financial services. (2) to take complementary steps to remove market barriers and promoting competition.
The movement proposes the following principles which should serve as basic guidelines of the committee:
1. There should be increased flexibility in financial regulation towards new and small actors.
2. There should be an aspiration to create new infrastructures and neutral data systems for new competitors that will ensure their independence.
3. To prefer serious and comprehensive treatment for the financial sector rather than to opting towards simple and convenient solutions.