Israel's Ministry of Finance reported that its reform to open the banking market to greater competition, including enabling the establishment of new small banks, was approved by a majority in the Knesset Public Enterprises Committee and will be brought to the Knesset plenum for second and third readings. The package is positioned as a measure to increase competition in retail banking, raise returns on deposits, and reduce borrowing costs for households and small and medium-sized enterprises. The reform would allow new entities to become banks and compete for deposits, including offering higher interest on deposits and current account balances, while encouraging new banks that specialise in lending to households and SMEs at lower rates. It is also framed as enabling the entry of new domestic and international banking players and broader product and service innovation. An accompanying study by economist Uriel Citroën is cited as estimating potential household savings of at least ILS 4.5 billion per year; compromises reached during committee deliberations include establishing a review team on introducing deposit insurance, supervision of bank holding companies, a prohibition on mergers among existing small banks, and restrictions on institutional intermediaries’ brokerage activity. Following completion of the bill’s clause-by-clause reading in committee, the next step is the plenary vote for final approval.

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