Finance Minister Bezalel Smotrich recently announced that he plans to impose an excess profits tax on the banks on the grounds that their large profits, which amounted to NIS 6 billion ($1.7 billion) in the last quarter, are not being properly passed on to customers.
This did not go down well with Israel Bank Governor Prof. Amir Yaron, who sent a harsh letter to Prime Minister Benjamin Netanyahu demanding that the ministerial legislative committee drop a bill compelling the banks to pay their customers interest on the money in their checking accounts.
After all, as soon as the funds in those accounts drop below zero, those same customers start paying interest to the banks.
The governor argued that such a requirement would constitute a violation of the Bank of Israel’s independence, an issue that is close to his heart, especially after some in the coalition demanded his head for raising interest rates and still failing to halt inflation.
“The proposal according to which the determination of the minimum interest rate on checking accounts by the Governor of the Bank of Israel should be made subject to the approval of the finance minister, constitutes a very serious injury to the independence of the Bank of Israel and its ability to manage monetary policy,” the governor complained.
“In general, the finance minister has been given the authority to effectively impact the interest rate in the economy and blatantly intervene in the management of monetary policy and its effectiveness,” Prof. Yaron continued. “The violation of the central bank’s independence embodied in the bill crosses a red line, and there is a real fear that it will be perceived as such by the international entities and the rating companies,” the governor warned.
Wait a minute, isn’t blatant interference in policy something the Supreme Court has been practicing for thirty years regarding Israel’s elected governments? Is Prof. Yaron, who dished it out so good on CNN, warning that the judicial reform would destroy Israel’s credit rating, unable to take some of his medicine?
Smotrich and Yaron will meet on Wednesday to discuss the bill forcing fat cat bankers to share with the mice.
