Bank Leumi CEO Opposes Mandatory Interest on Checking Accounts

Hanan Friedman, CEO of Bank Leumi, publicly opposed a mandate requiring banks to pay interest on all funds held in checking accounts. In a post on X, formerly Twitter, Friedman argued that while banks can choose to offer such interest, a universal requirement is inappropriate. He explained that his comments followed a poll he conducted among his followers, where the topic of checking account interest received the most votes.

Friedman stated that Bank Leumi already offers interest on checking account balances for eligible customers up to a certain limit, crediting the Governor of the Bank of Israel and the Supervisor of Banks for promoting such benefits. He questioned the principle of whether paying interest on checking accounts should be a permanent, mandatory obligation for all customers and all balances, regardless of other conditions or the economic climate.

He emphasized that a bank's primary role is to safeguard customer funds, positioning banks as "risk managers first and foremost." Friedman differentiated between checking accounts and fixed deposits, noting that money in checking accounts is immediately accessible, whereas fixed deposits provide banks with greater certainty for planning loans to families and businesses. "Simply put, the unavailability of the money, from the public's perspective, is worth money," he wrote.

Friedman reiterated that banks can opt to offer interest on checking accounts, but his objection is to a uniform, sweeping obligation that disregards varying conditions and the economic reality. He believes banks should compete for customers through interest rates and benefits, alongside service and products. Bank Leumi proactively contacts customers with significant checking account balances to suggest transferring funds to deposit accounts, including those with flexible withdrawal options.

In 2023, Bank Leumi was the first bank to announce interest payments on checking accounts, initially at 1% for balances up to NIS 10,000. This was later increased to 2% for balances up to NIS 25,000 for customers meeting specific criteria, following a call from the central bank governor. According to Bank of Israel data, positive checking account balances for private customers reached approximately NIS 233 billion in June.