Bank of Israel Gives Approval for New Digital Bank
On Sunday, a conditional license was granted by the central bank in Israel for establishment of the second digital bank in the country.
This would be co-led by the American-Israeli founder of Palo Alto Networks Inc, Nir Zuk. A statement was issued by the Yair Avidan, the Supervisor of Banks, and the Governor of the Bank of Israel, Amir Yaron.
They said that the inspection and review process was over and chief of the central bank was now ready to give Esh Bank Israel Ltd., the new lender, a banking license.
This approval would be the second one to be granted in three years by the Bank of Israel for establishing a new bank in order to give competition a boost.
There are currently five banks that dominate the banking sector in Israel. The new bank will be digital, which means it will not have any physical branches.
Esh will provide banking services to small businesses and households and the services include managing and receiving deposits and current accounts, providing credit and facilitating advanced payment services.
The chairman of the new digital bank would be Prof. Shmuel Hauser, who had previously headed the Israel Securities Authority.
The founding group
The cybersecurity firm Palo Alto Networks was set up in Santa Clara, California in 2005 by Zuk, who had formerly served as an engineer at Check Point Software Technologies, an Israeli cybersecurity firm.
Some of the other entrepreneurs who are also members of the founding group of the digital bank initiative include former CEO of Bank Massad, Kobi Malkin, who will take the same post at Esh, and businessman Yuval Aloni.
Yaron said that entry of new players and banks in Israeli’s banking system is of the utmost importance because they can boost competition and also promote innovation in the financial system.
He went on to say that due to the diversity of the founding group of entrepreneurs, they bring in strengths from various fields, which includes entrepreneurs who have international business and technological experience.
Now that the group has cleared the initial regulatory process and received a control permit for setting up the digital bank, they can now focus on the operational, mechanical and regulatory preparations needed for starting the operations of the bank.
The new technology will have to be tested, the management team needs to be recruited and additional bank staff has to be hired.
The central bank said that this establishment process would likely take about one and a half year. Hauser said that there was a long road ahead of them.
He also said that the synergy between banking and technology makes their bank unique. He also said that they would be able to deliver extraordinary operational efficiency because of Israeli technology.
He stated that this would be seen in the form of no commissions associated with banking services, attractive interest rates, no subscription fees and no preconditions like salary transfer.
The supervisor of banks will supervise the new bank for ensuring stability and safeguarding the funds of the depositors.