First to bow to pressure: Discount Bank raises deposit interest

Is public pressure on the banks having an effect? After the criticism that has gone as far as the Knesset of the gap between the rising interest rates charged by the banks on loans and the interest they pay on deposits, Discount Bank of Israel announced yesterday evening that, from today, its interest rate on deposits for one year or more would rise. This follows the publication of data on bank interest rates showing that on some deposits, Discount Bank offered among the lowest rates among the banks (on others it was slightly above average).

The bank’s announcement says that the annual interest rate it pays on deposits of one year or more, at fixed rates, will be 3%, putting it highest in the banking system. The bank is also raising the rate it pays on variable rate deposits for one year or more to be the same as the Bank of Israel’s lending rate, which is currently 2% (prime minus 1.5%). The rate will change in accordance with future changes in the Bank of Israel’s interest rate.

The question arises whether Discount Bank will also apply higher rates to daily, weekly, and monthly deposits , on which it still pays less than most of the banks, and whether the other banks will follow suit on longer term deposits.

This is not the first time that Discount Bank has channeled public criticism into a business move. In January this year, the bank announced that it would not charge interest on overdrafts of up to NIS 2,000, and that it would reduce the rates charged on higher overdrafts.

Discount Bank CEO Uri Levin said, “We are attentive to the public’s expectations of us and we are determine to be the best bank for its customers. We are committed to offering them in the future too varied tools for sensible financial conduct.”

Yesterday, Knesset Finance Committee chairperson MK Alex Kushnir called on the CEOs of all the banks and the Supervisor of Banks to adjust interest rates on savings and deposits in the light of the interest rate rise by the Bank of Israel. While the banks rushed to raise interest rates on their loans in line with the Bank of Israel’s rate hike, they applied only a small proportion of the rise in the central bank’s interest rate, amounting to 1.9% within four months, to deposits. Kushnir seeks to hold a discussion of the matter in the Knesset Finance Committee early in September.

Published by Globes, Israel business news – en.globes.co.il – on August 30, 2022.

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