The public doesn't understand and therefore the public will pay: the idle warning received by the banks will not change anything

At the height of the public uproar that arose as a result of the ridiculous interest on deposits, the supervisor of banks issued a letter in which he demands "consumer fairness in a changing financial environment".

To the point of absurdity, precisely the cumbersome wording explains the main problem: the customer does not understand what is wanted from him and the banks will continue to take advantage of this

Liat Ron

08/09/2022

Thursday, 08 September 2022, 11:06

• Share on Facebook

• Share on WhatsApp

• Share on Twitter

• Share by email

• Share in general

• Comments

  Comments

We don't laugh all the way to the bank - the bank is the one laughing at us (Photo: ShutterStock)

A good few months late, and at the height of a public uproar following the ridiculous interest rates on deposits, yesterday (Wednesday) the supervisor of banks issued a letter to banks and credit card companies titled: "Consumer fairness in a changing financial environment".

If this sentence seems to you to be written in a hidden language - you are not alone.

The letter was indeed addressed to the financial institutions, but it was distributed everywhere, with the goal that the public would understand that the state is attentive to its hardships.

Since it was written in "algorithmic economics for the advanced" - a financial language that I just invented - reserved for those in the know, we will try to give the things a Rashi interpretation, so that you too will understand what the inspector meant and whether anyone on the other side of your money is even excited by them. The title of the letter is actually a kind of "No, no, no", to all those who made the savers a round of deposits, only that the reprimand is so weak and diplomatic, that it is doubtful that it even reaches their ears.

Let the cat guard the mouse

"In recent months there have been changes in the interest rate and inflation environment," the inspector wrote, "these changes have raised the importance of increasing the ability of customers to understand the consequences of the changes and increasing their ability to compare the conditions offered to them by different banks in the variety of banking products, both on the credit side and in deposits" .

And here is the interpretation: the inspector understands that the public has no idea what the interest rates in the economy do to their deposits, so someone must teach them and explain to them that they need to compare the interest rates that are offered to them.

Who should do it?

The supervisor says that the job is the banks', so he talked to the senior officials of the system and asked them, in simple words, to protect the interest of their customers, and make sure that it is at the center.

The supervision's expectation that the banks, private businesses it should be mentioned, who are thinking about the huge profit they will reap again at the end of the year, think about their customers, is likened to asking a cat to see a mouse within a bite distance and refrain.

not going to happen.

The banks do want the customer not to switch to competitors, but no less than that, they really want to profit from him and as much as possible.

The one who is supposed to protect the customers, and maybe also release a series of "financial education" advertisements that will explain to them what to do when they come to the bank, is the supervisor and his job is to take responsibility and not pass it on to the financial corporations.

"The supervision intends to publish the interest rates, which are actually paid by each of the banking corporations," he added in his letter, "in order to give customers a simple tool that will help them easily compare the terms offered and choose the right product for them."

The fact that the Bank of Israel advocates transparency is tremendous.

It's just that transparency has no value if consumers don't understand what is wanted from them.

Even if the bank provides detailed explanations to the customer in "algorithmic economics", about the interest they give in various programs, while deliberately blurring the messages using terms that no one understands, 70% of the customers will stare at the clerk in confusion mixed with boredom and will happily agree to what he will offer them after such an exhausting conversation , as usually happens.

This letter does not seem to be effective, to say the least.

The Supervisor of Banks Yair Avidan (Photo: Reuven Castro)

And before finishing, let's do a little experiment: how many of you know the difference between variable interest and fixed interest?

And why when the banks, who panicked from the audit and suddenly became generous, offer you 3% and even 3.5% on a fixed interest rate, they don't come to meet you but once again give you an exercise?

So like this: a fixed interest rate is an interest rate that is not affected by interest rate increases in the economy.

So if the interest rate rises again, which is expected, you will not benefit from it.

A variable interest rate will rise with the increase in interest rates in the economy, and the banks do not want to share that.

In short, the supervisor of the banks demands that the banks and credit companies consider raising the interest rate on the deposits with English delicacy, but does not bar his teeth and does not threaten real sanctions.

His threat to publish the interest rates is funny, because the media publishes it regularly since it realized that the banks, who earned huge sums due to the interest rate increases, do not share in the celebration with the customers.

Does advertising change anything?

The perfume labeling reform of the former economy minister Eli Cohen required an advertisement on the shelf that compares the price of the product to its price abroad. Nothing has really changed, except for one thing: if before the consumers just bought, now they got angry at being stung and then moved on buy.

Time to take off the cloak

Beyond the fact that the letter is a statement of intentions and a signal that the supervisor is getting angry, it has no real meaning.

There are those who maintain that in a free economy the inspector cannot and does not want to interfere in the activities of private businesses.

Here is the place to mention that banking is a monopolistic market, and the role of the state is to intervene to create competition, what's more, in case a bank collapses, it will immediately come to its aid, so that the supervisor has all the authority and authority to take action.

Until the Chairman of the Finance Committee, Alex Kushnir, succeeds in convincing the Likud to allow him to convene it to discuss the "deposit thief", the supervisor must take off his diplomatic cloak and immediately determine a maximum gap between the interest on loans and the interest on deposits, and in human language: a bank will not be able to collect On loans or minus in an account an interest rate of 10.5%, and to give an interest rate of 0.006% on the deposit plus and the maximum difference between what a bank charges and what it gives, will be 5% for example. With profits of billions a year, when most of the people collapse under the burden, the banks must understand that You can dance at two weddings at the same time.You can also be satisfied with one relatively modest canopy.

• Of money

• our money

Tags

• banks

• the supervisor of banks