As a user I feel cheated every time I visit a branch. It’s not necessarily the high bank charges but the lack of service and professionalism I receive in return, something which is often extended to corporate clients as well. I believe that the faults lie both in the inherent corporate culture and that of the Israeli public.
In 1983 following the Bank stock crisis, all the major Israeli banks were nationalized and as a result picked up some ill suited practices.
One of these was the institutionalization of employee tenure. The result 25 years on is an overstaffed and mediocre workforce, especially in middle management, with low work motivation (the tenure replaces performance-driven work incentives) and advancement is often based on length of service rather than work performance. This culture filters down through the workforce, producing another generation of similar mindset.
The blame is no less with the public whose awareness and expectations of service is low, and as long as they don’t demand improvements the banks have no reason to make any.
Momentarily in this economic climate the Israeli banks seemed to have escaped the fate of others (globally) due to conservative banking practices (which partly originates from this institutionalized corporate culture)
The future may not be so bright. The quality workforce in the finance sector have moved to a growing number of investment houses and other financial institutions, preferring flexibility and training to long term job security. The public is becoming increasingly aware of banking practices elsewhere and many services have moved out of the banks (which in the past were a one stop shop for all financial products and services) to other financial institutions (i.e. Pension funds, portfolio management, internet brokerage). To make matters worse the ruling of antitrust commissioner Ronit Kan that the major banks have colluded for years on fees will definitely affect the relationships that the banks have had with their clients.
Furthermore the banks have recently come under scrutiny over issues relating to their business practices. The limelight is on Hapoalim bank for its conduct surrounding the “resignation” of its CEO Zvi Ziv (who incidentally had planned major structural change which included many job cuts). The Bank of Israel is demanding the resignation of the chairman Danny Dankner (who was seeking to avoid cutbacks), with the workers union unsurprisingly in support of Dankner.
For long term views on Israeli banks therefore it is advisable to take into consideration changes occurring within some of these banks trying to improve some of the above “bad practice”, something which will be necessary for them to get ahead. A couple of examples are:
Hapoalim bank (POLI) has introduced a ‘fast track’ management training program for bright graduates.
Mizrahi bank (MZTF) has launched their ‘live’ banking service which plans to remove the need for branch accounts by using, exclusively, online and telephone banking, yet providing a dedicated contact who even makes house calls.
When researching the Israeli banking sector, I believe that it as important to give attention to nonfinancial and related corporate governance issues as well as “crunching the numbers”.