At
a Banking Supervision Department conference held today, two main issues were
discussed in depth: The promotion of competition in the banking sector, and the
major technological changes that the banking system and its customers are experiencing.

 

Supervisor
of Banks Dr. Hedva Ber presented the preparation of the banks and the Banking
Supervision Department for the technological changes in banking. She also described
the new banking cyber center that was set up and began to operate in January—a
joint initiative of the National Cyber Defense Authority, the Ministry of
Finance, the Banking Supervision Department, all the banking corporations and
the credit card companies.

 

Supervisor
of Banks Dr. Hedva Ber

said, “I am happy to report that several weeks ago the new banking cyber center—which
is a quantum leap forward in the preparation for a new banking-technology
world—began to operate. The Banking Supervision Department brought together the
banks to collaborate with the National Cyber Defense Authority and the Ministry
of Finance in establishing the center, with the understanding that the
technological risks are becoming more powerful—large banks and credit card
companies around the world have dealt in the past year with major cyber events,
which led to, among other things, large-scale information leaks and attempts to
defraud and negatively impact many customers. We have to prepare ourselves that
such incidents are liable to occur in Israel as well.

The
banking cyber center has several goals: to reduce the number of cyber events;
to enable banks to respond rapidly to events that occur; and to assist in
managing a large national information-leak incident, through coordinating the
expert entities at the State level.”

 

The
Supervisor discussed the banks’ responsibility to continue to advance the
management of cyber risks and also to be innovative in adopting risk management
tools. In addition, she emphasized bank customers’ responsibility to increase
awareness of the risks of Internet-based information leakage and fraud, and to
act to reduce them through:

 

·        
Awareness and even suspicion regarding enquiries that appear to be enquiries
from the bank, since there are times when such an enquiry can actually be an
attempt by a hostile entity to steal customer data and funds;

·        
Setting an appropriate password for bank accounts and not distributing
it to any external entity;

·        
Installing protections on mobile phones, which today are main means of
entry to bank accounts;

·        
Taking care when using wi-fi;

·        
Checking bank accounts often to verify that no unknown transactions have
occurred;

·        
Suspicion and caution upon receipt of unknown emails or links.

 Presentation (Hebrew)

During
the conference, Check Point CEO Gil Shwed, in a discussion with the
Supervisor of Banks, said, “The future of cyber protection is already here, and
presents the global banking community with numerous challenges—particularly in
the area of mobile, preventing advanced attacks, and the cloud. We see that
relative to the situation in other countries, the banks in Israel are protected
well against the most advanced threats today. However, in the area of mobile,
only about 20 percent of banks in Israel take the necessary steps to ensure
that mobile devices, which are with us every minute of the day, do not turn
into the organization’s Achilles’ heel. In the future of cyber protection, it
will not be enough to protect networks through traditional methods, but to
adopt advanced protection technologies that will protect the cloud, employees’
mobile devices, and that will keep the attacks outside the organization.”

 

Additional
speakers at the conference included Bank of Israel Research Department
Director Prof. Nathan Sussman
, who spoke about enhancing and measuring competition.
Among other things, Prof. Sussman noted various reasons that there isn’t
perfect competition in financial markets. Perfect competition requires perfect
information for all participants, a lack of economies of scale and externalities,
a large number of players, a lack of agency problems and the possibility for a
customer to transact on a one-time and noncontinuing basis. Prof. Sussman also
listed a range of reforms and steps taken in Israel’s market in recent years,
which dealt with a number of the problems listed above. Prof. Sussman discussed
the issue of what will happen to the price of credit after separating out the
credit card companies. An analysis he presented indicates that it is not clear,
as there are various factors that impact in opposing directions, such as
interest on the sources, the risk premium, operating cost and the competitive
spread. He concluded that the financial market is complex and measuring
competition in it is not simple. The first stage is to remove various barriers
and there are many, as noted. Further on, careful reforms are likely to lead to
greater efficiency in the financial market and to more innovation for customers
in the form of convenience, range of products and services, and others. It may
be presumed that the process of enhancing competition is expected to last
several years, and therefore from the perspective of complexity of the reforms
and financial markets, their success should be measured by numerous and varied
measures over time.

Presentation (Hebrew)​

Commissioner
of Capital Markets, Insurance and Savings Dorit Salinger
spoke about the supervision of nonbank
entities in the period following the “Briss Law” and about increasing
competition.

 

Addresses
on technological issues were given by Amazon Vice President Frank Fallon,
who spoke about the use of cloud solutions as an enabler of banking system
changes, Head of Leumi Technologies Division at Bank Leumi, Dan Yerushalmi,
who spoke on “Opportunities in adoption of disruptive technologies—cloud and
mobile”, BankYahav CEO Shaul Gelbard, who shared the challenges in
switching a core banking system and how to deal with them, and the Head of
the National Cyber Defense Authority, Buki Carmeli
, who spoke about
“Enabling regulation” that expresses the importance of protecting cyberspace
alongside the recognition of the rights of the supervised entities and the
overall economy.