Israel\u2019s commercial banks, including Hapoalim, Leumi and Discount, have raked in record profits<\/a> over the past two years as they continued to cash in on high interest rates, credit fees and other charges paid by thousands of households and businesses mired in war and economic hardship during the war with the Hamas terror group.<\/p>\n Hapoalim shares dropped 4% at the close of trading in Tel Aviv on Thursday, but are up a whopping 76% this year, while Leumi was down 3.5% after soaring 71% from the start of 2025.<\/p>\n \n\t\t\tSign up for the Tech Israel Daily \t\t\t\tBy signing up, you agree to the terms<\/a><\/p>\n In an attempt to cool rising inflation, the Bank of Israel, like other global central banks, steadily hiked interest rates from a record low of 0.1% in April 2022 to a high of 4.75%. It lowered the benchmark rate in January 2024 by 25 basis points and to 4.25% last month as inflation slowed.<\/p>\n After coming under public scrutiny and at the request of the Bank of Israel, the country\u2019s lenders earlier this year agreed<\/a> to set aside NIS 3 billion ($942 million) over the next two years to pay for a new program that includes benefits and leniencies in credit and fees to help retail customers cope with the economic repercussions of the Gaza war.<\/p>\n \t \u201cIt can\u2019t be that the banks that profited from interest rate increases at the expense of Israeli citizens and did not lend a hand in the war will benefit from high rates without any efficiency on their part,\u201d Smotrich said. \u201cInstead of taking responsibility during the war they filled their pockets.\u201d<\/p>\n According to the proposed draft law, a special tax of 15% will be imposed on bank profits that are more than 50% above the annual average of their earnings in the years 2018 to 2022.<\/p>\n \u201cA large portion of the banks\u2019 profits is generated from high interest rates,\u201d said Smotrich. \u201cUnfairly, this interest is passed on to the public quickly and fully in the form of loans and overdrafts, but slowly and partially in deposits.\u201d<\/p>\n \u201cIt is right that part of these profits will return to the Israeli public,\u201d Smotrich added.<\/p>\n The special tax surcharge, which will be applicable for five years, is expected to boost state revenues by NIS 1.13 billion ($3.55 billion) in 2026 and by NIS 1.5 billion ($471 million) in each of 2027 to 2029.<\/p>\n The Association of Banks in Israel fiercely opposed the proposed tax surcharge and said in response that Smotrich is \u201cmaking arbitrary decisions without any economic logic and contrary to the public interest.\u201d<\/p>\n \t \u201cThe public needs to understand that it holds about 90% of the banks\u2019 shares and therefore taxing the banks means taxing the public,\u201d the association said, adding that long-term pension saving plans are invested in banks\u2019 shares.<\/p>\n The Bank of Israel expressed its opposition to a sectoral tax surcharge, arguing that additional sectors benefited from the increase in interest rates.<\/p>\n \u201cThere is no fundamental difference between profitability created from a successful investment in an asset and profitability created from choosing a financial strategy,\u201d the central bank said.<\/p>\n
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\n\t\tIllustrative: People walk by a Bank Hapoalim branch in Tel Aviv on March 25, 2025. (Miriam Alster\/FLASH90)<\/p>\n![\"\"](\"https:\/\/www.newsbeep.com\/il\/wp-content\/uploads\/2025\/12\/F150804MA20-640x400.jpg\")
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\n\t\tIllustrative: View of the Bank Hapoalim offices in the center of Tel Aviv. August 4, 2015. (Miriam Alster\/Flash90)<\/p>\n
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