The Banking Oligopoly

Five banks control approximately 98% of Israeli banking sector assets.¹ The top two — Hapoalim and Leumi — together hold roughly 48% of all assets and just over 50% of public deposits.¹ The five together generated NIS 29.5 billion (~$7.8 billion) in combined net profit in 2024 — a record, with both Leumi and Hapoalim posting all-time individual earnings.² On Wednesday May 6, 2026, the Israel Competition Authority formally declared the top five banks a "concentration group" — the legal status that authorizes targeted directives. The Bank of Israel publicly opposed the move as "extreme and disproportionate" — the defining regulatory conflict of 2026.

The concentration

The five banks — Bank Hapoalim, Bank Leumi, Israel Discount Bank, Mizrahi Tefahot Bank, and First International Bank of Israel — control approximately 98% of Israel's roughly NIS 3 trillion (~$1 trillion) in banking sector assets.¹ By any international measure, this is one of the most concentrated banking markets among developed economies. The US top five hold roughly 45% of US banking assets. The UK top five hold roughly 70%. Germany's top five hold roughly 35%.

The concentration runs deeper than the headline number. Hapoalim and Leumi together hold 48% of all banking assets and more than half of all public deposits.¹ In the mortgage market, the three-bank concentration is even sharper: Hapoalim and Leumi together at 45%, Mizrahi Tefahot alone at 36% — three banks issue roughly 81% of all Israeli mortgages.¹

The 2024 profit cycle

The 2024 financial year was the most profitable in modern Israeli banking history. The five banks generated combined net profit of NIS 29.5 billion (~~$7.8 billion).² Both Leumi and Hapoalim posted all-time individual record earnings. Combined banking sector income from interest payments and fees reached approximately NIS 153 billion (~~$53 billion) in 2024.³

The profits were driven by the rate environment. The Bank of Israel's monetary tightening cycle through 2023-2024 raised lending rates aggressively while deposit rates lagged — a pattern any banking system in any rate environment will produce, but one the Israeli concentration amplified well beyond what a competitive banking market would have allowed. The Bank of Israel introduced a scheme in 2024 forcing the lenders to offer NIS 3 billion (~$790 million) in financial "relief" by 2027 — a partial regulatory response that did not address the underlying conditions.²

The May 6, 2026 concentration group declaration

On Wednesday, May 6, 2026, Israel Competition Authority Director-General Michal Cohen formally declared the top five banks a "concentration group" under Israeli competition law — the legal status that authorizes targeted directives.⁴ The declaration was the result of an investigation that opened in 2023.

The directives are scheduled to take effect May 6, 2027, exactly one year after the declaration.⁴ They address three conditions:

Deposit price discrimination. Banks will be prohibited from offering different deposit interest rates to different customers without transparent justification, and will be required to ensure full transparency between advertised and actual rates.⁴

Customer-switching friction. Banks will be required to proactively contact customers near deposit renewal dates, present alternatives, and enable online deposit transfers to other banks or financial entities without fees.⁴

Standalone product access. Banks will be required to offer standalone banking products to customers without forcing them to maintain a current account.⁴

"The declaration of the banks as a concentration group is an important step in transferring bargaining power to the public," Cohen said. "The directives that will be imposed are intended to stop the behavior of banks that make it difficult to compare prices of banking services and switch to competing banks and financial institutions."⁴

The Bank of Israel dissent

The Bank of Israel publicly opposed the declaration. In an official position paper issued in May 2026, the central bank described the move as "an extreme and disproportionate step that, on the one hand, may deter investors from operating in Israel and, on the other, is not expected to increase the welfare of bank customers."⁵

The Bank of Israel argued that "most of the directives accompanying the declaration have already been implemented in practice by the Banking Supervision Department" as part of the prudential reforms the central bank has led across recent years.⁵ Bloomberg covered the dispute as the most visible policy split between Israeli regulators in recent memory.⁶

The two regulators do not disagree on the diagnosis. Both agree the sector is highly concentrated, generates record profits, and charges high fees. The disagreement is over the tool. The Competition Authority believes the concentration group declaration with binding directives is necessary. The Bank of Israel believes its existing prudential and competition-promoting measures are sufficient, and that the concentration group declaration creates unnecessary investor-deterring risk.

The Neema fine — April 2025

In April 2025, Bank Hapoalim and Israel Discount Bank were each fined NIS 40 million (~$10.5 million) by the Competition Authority over their minority holdings in the Israeli fintech startup Neema.⁷ Competition Authority Director-General Cohen concluded that the rights granted to Discount and Hapoalim through their Neema holdings — including the right to appoint a director — would create conflicts of interest and could affect the competitive conduct of Neema and the commercial banks in a way that would reduce competition between them.⁷

The fine was a marker beyond its monetary value. It signaled that the Competition Authority would treat incumbent commercial bank minority equity in fintech startups as a competition-restricting arrangement subject to penalty going forward.

The open question

The May 2026 declaration is the most serious regulatory pressure on the Israeli banking concentration in modern history. Whether the concentration shifts materially — whether the 98% top-five share declines below 90% within five years, whether mortgage market share rebalances toward Mizrahi Tefahot and the new digital banking entrants, whether deposit pricing friction narrows — is the central question for the sector over the rest of the decade.

The conditions that produced the concentration are durable. Israel's small market size, the historical state ownership and subsequent privatization architecture of the 1980s and 1990s, the cross-holding between commercial and institutional capital, and the regulatory framework that emerged through the 2000s and 2010s all reinforce the existing concentration. The May 2026 declaration is the most serious effort to address those conditions in a generation. Whether the directives produce material change after they take effect in May 2027 is the most-watched question in Israeli financial regulation.

Read Next in The Olam

The Mortgage Market — Detail on the three-bank mortgage concentration

Bank of Israel and the Monetary System — Detail on the central bank's parallel regulatory framework

Concentration group · Bank of Israel — Glossary

Bank Hapoalim · Bank Leumi · Israel Discount Bank · Mizrahi Tefahot · FIBI

Sources

¹ The Times of Israel, "Regulator demands fairness from Israeli banks as they cash in on hefty fees," May 2025. https://www.timesofisrael.com/regulator-demands-fairness-from-israeli-banks-as-they-cash-in-on-hefty-fees/ ² Middle East Monitor citing Financial Times, "Israeli banks under fire for soaring profits," September 2025. https://www.middleeastmonitor.com/20250904-israeli-banks-under-fire-for-soaring-profits-amid-gaza-genocide/ ³ The Times of Israel, "Regulator demands fairness," May 2025 (NIS 153B 2024 interest+fees). ⁴ The Times of Israel, "Israel's competition watchdog declares top 5 banks an oligopoly, targets deposits," May 6, 2026. https://www.timesofisrael.com/israel-competition-watchdog-declares-top-banks-an-oligopoly-targets-deposits/ ⁵ Bank of Israel official position paper, May 2026. https://www.boi.org.il/en/communication-and-publications/press-releases/the-bank-of-israel-s-position-regarding-the-competition-commissioner-s-announcement-of-the-five-banking-groups-as-a-concentration-group-and-the-issuance-of-directives-in-the-area-of-deposits/ ⁶ Bloomberg, "Israeli Central Bank Criticizes Oligopoly Label for Top Lenders," May 2026. https://www.bloomberg.com/news/articles/2026-05-06/israeli-central-bank-slams-move-to-label-top-banks-an-oligopoly ⁷ The Times of Israel, "Hapoalim and Discount each fined NIS 40 million by competition watchdog," April 2025. https://www.timesofisrael.com/hapoalim-and-discount-each-fined-nis-40-million-by-competition-watchdog/

Data current as of Q2 2026.