Israeli Banking System: Current State and Future Development Perspectives

Abstract

Being the foundation of the financial system of the state, the banking sector is key in a number of development areas. Since money is an extremely sensitive instrument, banks are generally fairly conservative institutions. However, the acceleration of the pace of scientific and technological progress, the expansion of its scope more and more affect the financial sector of the economy as a whole and banks as its central component. The article shows that in the first two decades of the XXI century Israel’s banking system has undergone a significant transformation. The main objective of the reforms was to reduce the level of concentration in this sector. It was also essential to improve the transparency of the functioning of the country’s banking system. In general, it should be noted that, despite the rather strong resistance from the leadership of the largest banks in Israel, by the beginning of the third decade of this century, the country’s banking system came up in much better “shape” than it was before the reforms began. Meanwhile, nevertheless, the level of concentration in it is still quite high. It seems that the processes of digital transformation, which, albeit slowly, but occur in the country’s banking system, will make it even more efficient and adequate to the requirements of the modern economy. Digital platforms are democratic and transparent by their very nature. Their introduction by Israeli banks will significantly increase the transparency and decentralization of the national banking system. At the time of this writing, digitalization processes in this area are only at the very beginning, so at this stage it is difficult to say how successful their results will be, despite, of course, the high transformational potential of digital technologies, which was mentioned earlier.