Israel Antitrust Authority: Mobility between banks extremely low

The Antitrust Authority has poured cold water on the Bank of Israel's optimistic predictions about the founding of a digital bank. "An examination by the Antitrust Authority shows that the parties interested in the matter are still at a very early stage in the process. Obtaining a banking license is a very long process liable to take years and there is no certainty that a license will be granted," the Antitrust Authority writes in a document published today explaining why it refused a few weeks ago to allow the merger between Mizrahi Tefahot Bank (TASE:MZTF) and Union Bank of Israel (TASE: UNON).

"The time needed to create goodwill and recruit customers is likely to be very long. To illustration the point, one the parties interested predicted that five years after entering the market, its market share would be less than 1%," the Antitrust Authority writes. "The concern about competition aroused by the merger will not be relieved in the foreseeable future."

The Antitrust Authority reported figures from the banking system showing that only 1.5-1.8% of customers switched banks in the past year (from mid-2016 until mid-2017). "Another indication that barriers to switching banks are high is the length of time customers keep a current account at a bank. The average is 7-19 years, and the figure is especially high at the major banks," the Antitrust Authority writes.

The Antitrust Authority's document shows that government agencies other than the Bank of Israel opposed the merger: the National Economic Council was opposed, arguing that the damage that the merger would cause outweighed its benefit. The Ministry of Finance budget department also said that the merger would harm competition because Union Bank could potentially generate competition. The Antitrust Authority also noted that the minister of finance and the minister of economy and industry were opposed to the merger. The controlling shareholders in Union Bank do not agree with the Antitrust Authority's decision, to say the least, and intend to appeal against its ruling to the Restrictive Trade Practices Tribunal.

Published by Globes [online], Israel business news - www.globes-online.com - on June 24, 2018

Israel Antitrust Authority: Mobility between banks extremely low

The Antitrust Authority writes that competition from a digital bank is both uncertain and a long way into the future.