Banks Push Back on Proposal to Shield New Investment Accounts

Israel’s banks are warning they will fight any plan to keep them out of the new unified investment account being designed by the Arbitrage Committee. The committee, which includes representatives from the Israel Securities Authority, the Capital Market, Insurance and Savings Authority, the Finance Ministry and the Tax Authority, is expected to publish its final recommendations in the coming weeks. One option under review is a temporary "infant protection" period for investment houses, giving them several years of exclusivity or a regulatory edge over banks.

Bank executives argue that excluding them would hurt consumers and undermine objective advice. A senior banking source said the committee had so far worked "from the perspective of the public interest," and that allowing banks to participate would best serve clients because banks remain the main source of objective investment advice. Another banker said the plan would create an irrational market distortion, because customers would be pushed toward firms that have an incentive to sell specific products, while banks are bound to provide objective advice.

The proposed product is meant to consolidate most non-pension savings and investments into one account. Instead of holding separate products, such as securities portfolios, mutual funds, investment provident funds and savings insurance policies, investors would manage everything in one place. A key feature would be tax deferral, so buying and selling securities, switching mutual funds or changing investment tracks would not trigger tax, and capital gains tax would be paid only when money is withdrawn.

The banks say they are preparing for the possibility of being excluded, even if they still think it unlikely. "If the decision is different, we will not accept it," one senior banker said, adding that they would explain to the public that the move harms them and then take the fight to the Knesset. The Israel Mutual Funds Association has also opposed excluding banks, saying the reform will succeed only if all stock exchange members can operate the platform, because banks have superior distribution reach. The dispute has become a wider fight over who will control a possible future main channel for Israelis’ non-pension savings.