Israel to Allow Small Non-Regulated Banks

Jerusalem, 7 August, 2025 (TPS-IL) — The inter-ministerial team, appointed by the Minister of Finance, Bezalel Smotrich, and the Governor of the Bank of Israel, Prof. Amir Yaron, headed by the Commissioner for Budgets at the Ministry of Finance, Yogev Gerdos, and the Supervisor of Banks at the Bank of Israel, Dani Khachiashvili, recommended an outline that will allow the establishment of small banks, with reduced regulation. This is with the aim of increasing competition and reducing concentration in the banking system in a way that will benefit households and small and medium-sized businesses.

The team focused on removing restrictions and reducing barriers to the entry of new players into the banking system, including players active in the financial market, who may contribute to increasing competition in the banking system, such as: credit card companies, non-bank credit providers and payment companies, with a view to maintaining the stability of the banking system and the well-being of customers, and providing a response to conflicts of interest that may arise from the structure of holdings in those additional players.

The Treasury said that a small bank whose assets do not exceed 5% of the system’s total assets will be able to operate a flexible, innovative, and lean business model that allows for the offshoring of financial services; including focusing on deposit and credit activities only.