The Woman Trying To Shake Up Israel's Financial System

Bloomberg Markets|October - November 2019

The Woman Trying To Shake Up Israel's Financial System
Israel is known for tech innovation, but its banks have a lot of catching up to do.
Ivan Levingston

So Hedva Ber, the supervisor of banks within Israel’s central bank, is cutting red tape and spurring competition. That includes awarding the first new bank license since the 1970s, to a digital bank led by two tech entrepreneurs—Marius Nacht of cybersecurity company Check Point Software Technologies Ltd. and Amnon Shashua of Mobileye NV, which develops autonomous driving software. Ber said the new branchless bank, which will offer credit and brokerage services, will “lead a change in the market.” With a Ph.D. in economics from Hebrew University, she has spent more than two decades learning about the financial sector from positions within the Bank of Israel and Bank Leumi, the country’s biggest lender by assets. In an interview in Tel Aviv, Ber, 51, described the challenges of moving the industry away from its socialist roots while keeping risks under control.

IVAN LEVINGSTON: How did you get into bank regulation?

HEDVA BER: I started to work in the Bank of Israel at age 25. I fell in love with banking and bank regulation. And in the process of my career, all the different choices I made, I had in the back of my mind that I’d want to one day be the supervisor of banks, and 23 years later I received the position. Today I’ve been doing it for more than four years, and I can say it was the right dream. It’s a significant job—exciting, challenging, and I enjoy it.

IL: What specifically made it your dream job?

HB: The regulator has a very elevated influence on the banking system and via the banking system on the entire economy, on households, on who takes mortgages and who can’t get one and buy an apartment, on small businesses and big businesses, on economic growth, on financial stability. What’s exciting at the end is the people, that the regulation influences them.

IL: Why move between the private and the public sector?

HB: It gave me a lot of perspective, to see things from the side of Bank of Israel, the regulator, and also from the side of a bank. This gives me tools to do this job in a balanced way, with an understanding of which risks are big and mustn’t be implemented, and which risks are possible to handle.

IL: Israel’s known as “startup nation.” How do banks compare?

HB: The banking system in Israel is innovative. Startup nation is also fintech nation, and there were big and innovative changes in recent years—in the banking system, technology, and also in managing risk. The cybersecurity of the banking system is a leader in the world. We, the bank supervisor, actually have set as our central goal for the past few years to make the banking system more innovative and technologically advanced. We removed all restrictions on digital banking. We required that on every bank’s board of directors at least one director should have knowledge and experience in technology and innovation. The board should advise and push the bank to fit its business model to the changing world. We made it possible for the banking system to move to cloud technology, making it possible for more collaboration with fintechs. And we put out just recently, just about a month ago, a letter to the banking system that said we encourage them in implementing innovation and as regulators we are ready for risks to be realized. So again we essentially give them comfort to advance with innovation that has risks. But we make demands for how to manage the risks.

We recently permitted banks to open client accounts from afar with face recognition, without a banker on the other side. Just technology. Now more and more accounts are opened this way.

IL: Can the financial sector learn from the tech world?

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October - November 2019