Israel's Five Largest Banks Challenge Competition Authority's Concentration Group Designation

About three months after being designated as a concentration group by the Israeli Competition Authority, the country's five largest banks, Bank Leumi, Bank Hapoalim, Mizrahi Tefahot, Discount Bank, and Bank HaPoalim, filed an appeal this week with the Competition Tribunal. Bank Yahav, half-owned by Mizrahi Tefahot, is also expected to join the appeal. The banks oppose the Competition Authority's decision and the related deposit regulations set to take effect in May 2027, which aim to prevent price discrimination, increase transparency, and improve deposit information accessibility.

The appeal challenges the Competition Authority's decision made by Commissioner Michal Cohen in May, following a multi-year investigation triggered by interest rate disparities between current accounts, deposits, and credit. The banks argue the authority acted beyond its powers, disregarded the position of the Bank of Israel, the primary banking regulator, and contend that the intervention could harm competition and ultimately customers.

The appeal process is expected to be lengthy, potentially lasting up to two years, as the Competition Tribunal is part of the busy Jerusalem District Court with no fixed timelines. After the banks submit their arguments, the Competition Authority will respond, followed by possible replies from the banks, witness examinations, and final summaries. Until a ruling is made, the concentration group designation remains in effect, and the deposit regulations are scheduled to be implemented in 2027, though the banks may seek to delay their enforcement.

The appeal also highlights a regulatory dispute between the Competition Authority and the Bank of Israel, which opposed the designation, calling it an extreme and disproportionate step that could deter investment and not improve customer welfare, noting that many of the proposed measures are already enforced by the Bank of Israel's banking supervision. Previous precedents exist for overturning Competition Authority decisions, such as a 2019 ruling favoring Mizrahi Tefahot in a merger case. The last concentration group declaration was in 2013 concerning Haifa and Ashdod ports, which ended with softened conditions after an appeal.

The outcome of this appeal will have significant implications for Israel's banking sector competition and regulatory landscape.