Israel's finance committee chief faults government over soaring bank profits
JERUSALEM, March 4 (Reuters) - The head of Israel's powerful parliamentary finance committee criticised the government and central bank on Tuesday for allowing commercial banks to post huge profits and said he would consider taking unspecified steps to rein in the lenders.
"The state and the Bank of Israel have failed in their supervision of banks," said committee chairman Moshe Gafni.
He spoke hours after Leumi (LUMI.TA), opens new tab, one of Israel's two largest banks, said it earned nearly 10 billion shekels ($2.75 billion) in net profit in 2024, up 40% from 2023. On Monday, rival Hapoalim (POLI.TA), opens new tab said it made 7.6 billion shekels last year, with bank profits boosted by high interest rates.
"There is an economic need to allow banks to operate independently, but this recklessness ... exceeds the boundaries of reasonable and normative management in banks in Israel," Gafni said.
"At a time when the cost of living is soaring and many families are barely making ends meet, the banks are operating as if there are no price increases. The Finance Committee will reconsider its position on this important matter."
He did not elaborate, and the Bank of Israel did not immediately respond to a request for comment.
Gafni has been a frequent critic of the Bank of Israel for raising its benchmark interest rate sharply - to 4.75% from 0.1% in April 2022 - to battle inflation, although the rate has lately eased to 4.5%.
He also believes the central bank did not push banks enough to pass on rate hikes to customers' savings and checking accounts as quickly as to mortgages and other loans. Public anger over a spike in borrowing rates has also mounted, especially as banks have been paying out 40% of net profit each quarter in dividends and share buybacks.
Hapoalim and Leumi are seeking to distribute at least 50% of profit in 2025, a move banks see as helping the public since most Israelis benefit through their pension and other funds held at institutions.
Under a tax amendment passed a year ago, banks in 2024 and 2025 must pay an additional 6% of profit generated from activities in Israel, a move promoted by Gafni.
($1 = 3.6375 shekels)
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