The five largest banks launch a legal battle against being declared a concentrated group
The banks filed an appeal to the Competition Tribunal against the Commissioner's decision to declare them a concentrated group, as well as against the directives set in the field of deposits. Industry experts estimate that the legal process could last up to two years. What will happen in the interim period until a decision is reached, and what are the chances of the decision being overturned?
About three months after being declared a concentrated group, the five largest banks in Israel — Bank Leumi, Bank Hapoalim, Mizrahi Tefahot, Discount, and First International Bank — filed an appeal this week to the Competition Tribunal against the decision of the Competition Authority. Bank Yahav (50% of which is owned by Mizrahi Tefahot) is also expected to file an appeal.
As part of the appeal, the banks also opposed the directives set in the field of deposits and asked the tribunal to cancel them. What will happen in the interim period, how long will the process take, and what is the chance that the decision will be overturned? Globes puts things in order.
What are the banks appealing against?
The appeal is directed at the decision of the Competition Commissioner, Adv. Michal Cohen, from last May, following an investigation that lasted several years. The Competition Authority's investigation against the banks was opened following the interest rate gaps in current accounts and deposits versus credit.
Along with the declaration, the Commissioner imposed four directives in the field of deposits intended to take effect in May 2027 and to prevent price discrimination, increase transparency, and make information about deposits accessible.
From the Competition Authority's perspective, this is a competitive declarative statement about the situation in the banking market. In a recent interview with Globes, Adv. Yael Sheinin, the legal advisor of the Competition Authority who resigned this month, said: "We imposed directives whose goal is to increase competition between banks, because banks must offer deposits without discrimination both to those who have a current account and to those who do not."
What are the banks' arguments in the appeal?
Among the banks' arguments in the appeal: the Authority acted without authority, took a step contrary to the position of the Bank of Israel, which is the direct regulator of the banking system, and the claim that the Authority's intervention will not only not help but will actually harm existing competition and ultimately harm the system's customers.
How long will the appeal take?
The appeal is expected to take a long time. The Competition Tribunal is part of the Jerusalem District Court and is considered one of the busiest courts in the country. The judges hearing competition law cases are David Gidoni and Dana Cohen-Lakach.
The Competition Tribunal is a special judicial body, and it has no official schedules. After the appeals are filed, the Authority will submit its position, likely in December. After that, the banks may request to submit a response. Subsequently, the declarants on behalf of the banks will be cross-examined in the tribunal, and finally, summaries will be held. Competition law attorneys estimate that the appeal could last up to two years if investigations are carried out.
What will happen until the decision?
Until the appeals are clarified, the declaration that the banks are a concentrated group remains in effect. There is a theoretical possibility that the Authority will impose additional restrictions during the appeal period as well. The directives imposed in the field of deposits are supposed to take effect only in May 2027, and the banks can request to postpone their entry into force if the process continues until then.
What is the Bank of Israel's position?
The appeal will also decide the professional dispute between the two regulatory bodies and the Competition Authority. The Bank of Israel opposed the move, arguing that the declaration is an extreme and disproportionate step that could deter investors from operating in Israel and is not expected to lead to an increase in the welfare of bank customers — this is because most of the directives accompanying the declaration have already been implemented by the Banking Supervision Department at the Bank of Israel.
In favor of the banks is the position of the Bank of Israel, and this will have weight in the process. At the same time, the Competition Authority comes to the process after an investigation that lasted years with a consolidated factual infrastructure.
What are the chances that the appeals will be accepted?
There are precedents for accepting appeals against the Commissioner's decisions. For example, in 2019, Judge Oded Shaham accepted an appeal by Mizrahi Tefahot Bank against the Authority's decision to oppose the merger with Union Bank. The last time the Authority declared a concentrated group was in 2013, regarding the ports of Haifa and Ashdod. The ports filed an appeal, and the process ended in 2015 when they reached agreements to soften some of the conditions set for the group.
