Increased efficiency in real estate (Hebrew)

of Banks Dr. Hedva Ber said, “The banking system in Israel is characterized by
low efficiency compared with banks in advanced economies, and one of the key
goals of the Banking Supervision Department is to improve the banks’
efficiency—that is, a reduction of bank expenses relative to their income. Our
goal is that banks’ increased efficiency will be “rolled over” to customers
meaning that it will lead to reduced costs of banking services, shifting of resources
to innovation and improved banking service, and to increased dividend distributions
to shareholders, who are mainly the Israeli public. The previous directive that
we published about a year ago has already led to significant steps to increase
efficiency in human resources, in a manner that respects the workers who retire
from the banks. The draft directive that we published today for the banking
system encourages the banks to examine increasing efficiency in the area of
real estate and its operation as well, by easing capital requirements for banks
that choose to sell the real estate premises serving management and executive
offices and to move to an alternative location that will lead to medium term
and long term savings.”


January 2016, the Banking Supervision Department published a directive on the
issue of operational efficiency of the banking system in Israel. Due to this
directive, most banks presented significant voluntary retirement plans, which
allow employees that are interested in doing so to retire from their work at
banks even before the retirement age, with appropriate compensation. The plans
are expected to lead to a reduction of about 12 percent in the human resources
at the banks between 2016 and 2020, a reduction that derives from voluntary
retirement and from natural retirement that for the most part will not be
replaced with new workers.


position of the Banking Supervision Department is that reduction of human
resources is required against the background of the technological-digital
revolution, which has led to considerable changes in how banking services are
consumed by customers, and to the banks having to adjust themselves to a “new
world”. Similarly, the increased efficiency is necessary in order to lead to
lower costs of banking services to the public. Within the framework of the
steps being taken by the Banking Supervision Department to enhance competition
and reduce costs to customers, and in order to verify that the savings received
from the increased efficiency will be rolled over in reduced costs to customers
of banking services, the Banking Supervision Department instructed banks to
adjust the fee schedule and provide a discount on each activity conducted via
direct means (digital, Internet, and automated devices). The guidelines will go
into effect during the year.


Banking Supervision Department is now taking an additional step to encourage
increasing efficiency in the banking system. The draft of the new Directive
that is being sent today to banks expands the definition of increasing
efficiency and encourages the banks to examine as well the option of reducing
real estate and maintenance costs for executive offices and management premises,
including through the renewed examination of geographical location of these
units and relocation from major city centers.


most of the banks own considerable real estate in the middle of large cities,
which serves the banks’ management, executive offices, and at times information
system units as well. The operating costs and municipal taxes in respect of
these buildings are vey high and the value of these buildings increased
considerably in recent years. The workforce reduction also impacts the bank’s
requirements with regard to real estate. The draft directive encourages the
banks to increase efficiency in the real-estate sector as well, through an
easing of supervisory capital. The easing will be granted to banks that decide
to sell real estate that serves management and executive office units and move
to an alternate location, which will allow savings in expenses over time. This
incentive will enable banks to increase efficiency in real estate, to examine
the need to expand programs to increase efficiency in human resources, and
create a source for continued growth and increased credit.​​