Israel’s banking supervisor, Daniel Hahiashvili, said Monday that fairness toward customers and more competition were needed in the banking system, as lenders rake in record profits fueled by high interest rates and costly fees levied on an increasingly debt-burdened public.
“Our message to the banking system is that fairness is not just a nice-to-have,” said Hahiashvili, speaking at a press conference in Tel Aviv. “We see the discourse about fairness by customers, and banks that do not respond will be in trouble.”
Hahiashvili stressed that Israel’s highly profitable banks need to show the public that the financial gains also translate into competition, fairness, and better terms and conditions for customers. A banking system that generates high profitability over time should also demonstrate that it works in the public interest, whether through increased competition, improved deposit terms, handling fees, relief measures, or more proactive customer service, he said.
Hahiashvili made the comments as the Bank of Israel published its annual survey of the local banking system for 2025, which showed that lenders continued to generate record profits despite three years of war, an unstable geopolitical environment, and a real estate market that is under pressure.
In 2025, the country’s banks posted record profits of NIS 32 billion ($11 billion), an 8.7 percent increase over the previous year. Behind the soaring financials stand millions of Israelis whose high interest payments, credit fees, and other charges have fueled lenders’ payday.
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The country’s concentrated banking system is largely controlled by five large banks, which have been accused of profiteering thanks to high interest rates for loans and mortgages, posting record profits over the past three years as much of the rest of the country struggled to make ends meet amid the rising cost of living in an economy battered by war.
People withdraw money from a Bank Hapoalim ATM in Tel Aviv on December 9, 2024 (Miriam Alster/FLASH90)
The five largest banks together hold about 97 percent of a total NIS 3 trillion ($1.03 trillion) in assets, with Bank Leumi, Bank Hapoalim, and Mizrahi Tefahot Bank alone accounting for 72% of the market. The two largest banks, Leumi and Hapoalim, hold just over 50% of all public deposits. In the mortgage sector, which includes housing credit, they have a market share of 45%, and Mizrahi-Tefahot has a 36% share.
The meager competition means banks can charge excessive fees with little fear of blowback. When it comes to interest paid on deposits and savings, the lenders have been criticized for sluggishness in offering customers higher rates accordingly, or for failing to do so altogether.
Last year, Israeli banks raked in almost NIS 153 billion ($53 billion) in income from interest payments and fees paid by customers, according to the annual report. Net interest income by the country’s banks in 2025 increased to NIS 138 billion ($47.5 billion) from NIS 132.5 billion ($45.6 billion) a year earlier. Fee income soared almost 11% to NIS 14.9 billion ($5.1 billion) year-on-year.
Hahiashvili said that surveys show the public is complaining about a lack of fairness by the banks in their day-to-day conduct and dealings with customers.
“What customers want is fairness,” said Hahiashvili. “They want their bank to be proactive and offer them propositions, to help lower costs and provide them with solutions to all kinds of problems they have so they can make informed decisions about their finances.”
Banks have been accused of differential behavior by charging a certain fee or paying interest on a deposit for one customer, while another customer with similar characteristics is given better terms.
People walk past a branch of Bank Leumi in Jerusalem on February 5, 2024. (Chaim Goldberg/Flash90)
“I hope that in the coming days we will release the final version of our reform to introduce a fixed NIS 10 ($3.45) management fee for 100 transactions in a bank’s current account,” said Hahiashvili. “A current account is a basic product and it should be accessible to every citizen at a low cost.”
Hahiashvili listed a series of steps that the Banking Supervision Department has already taken to improve fairness and trust in the banking system by increasing data transparency on banking services, as well as to provide comparison tools — for example, on bank fees — and facilitate the transfer from one bank to another to strengthen the bargaining power of customers.
Hahiashvili emphasized that the central bank is advancing measures to remove additional regulatory, infrastructural, and other barriers for the entry of new banks and lenders to the system.
“To promote competition in the banking system, we need a competitive infrastructure by bringing in new players,” said Hahiashvili. “Once we see new players, it will change the market… and we will see new players entering the banking market in Israel within a year.”
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