What Is a Bank Identity Statement and What Is It Used For?
Note for International Readers: This article refers to the Israeli banking system and applies to anyone who holds a bank account in Israel.
Understanding your bank identity statement as a first step toward grasping your financial situation.
At the end of February each year, envelopes or online messages begin arriving containing bank identity statements, one for each bank account we hold. The bank identity statement is a tool that provides us with a comprehensive financial picture of our banking situation. It includes information about household expenses and income, financial assets, and liabilities. The information in this report is an important tool for supporting financial decision making, and understanding the information in the report is the first step toward changing and improving how we manage our banking relationships.
The purpose of the regulation that led to the creation of this new document is to enable customers to truly understand their banking situation, enhance their ability to monitor their accounts, and strengthen their negotiating power regarding the terms they receive from their bank. This essentially encourages competition among banks.
What Is a Bank Identity Statement?
A bank identity statement is a report that banks are required to produce annually. It presents to customers all existing banking and financial activity in their bank account as of the last day of the previous calendar year. The report includes information about the customer’s banking assets, liabilities, the fees and interest paid. The report comes in two formats: a short, concise report presenting the main data points, and a detailed report that goes deeper into the data and information.
The report is sent to households and small businesses every year on February 28th through their online banking account or by mail. You can request an updated report at other times during the year, and such a request may help improve terms and fees, for example when switching to another bank or before taking out a loan.
The report comes in two versions: the short report that will be sent to you automatically by mail, email, or through messages in your online account, and the detailed report that can be found in the reports section of your account on the bank’s website or requested from the bank.
What Data Does the Bank Identity Statement Include?
The bank identity statement includes account and owner details, balances as of December 31st of the past year, monthly income in the account compared to monthly expenses, the size of credit facilities and their utilization, deposits and savings (including terms and exit points), housing loans (mortgages) and other loans (including interest rates and remaining loan balance), securities portfolio, fees you paid to the bank in the past year by fee type, and more.
What Won’t Appear in the Bank Identity Statement?
- Banking data from accounts held at other banks.
- Information about housing loans whose owners differ from the account holders’ names. A housing loan will only appear in the report if there is complete identity between the account holders and the loan holders. For example, if the loan holders are Israel and Israela, but the account holder is only Israela, the loan will not appear in the report.
- Information about non-bank credit cards.
- The breakdown and summary of expenses in the account do not include payments for fees and interest. This data appears in section C4 of the report under “Fees” and in cells titled “Total income/expenses from interest and indexation.”
- The amount in arrears on a loan that was not paid on time does not include the legal expenses involved in collecting it.
- The data in the report are partly monthly averages and partly balances correct as of the end of the year. Pay attention to the definition of the data you are examining.
What Can We Learn from the Bank Identity Statement?
Reading the report can help us answer many important questions, including:
- How much overdraft did we have during the past year, and how much did it cost us?
- Are the interest rate terms we receive on bank credit (loans and bank overdrafts) good, or could we perhaps improve them through negotiation or by switching to another bank?
- How much does managing our bank account cost us, what fees are we paying, and would switching to a different fee package save us money?
- Are we living within our income, or are our expenses higher than our income?
- How many loans do we actually have, what are their terms, and when do they end?
- Annual rate of return on securities portfolio.
- Is our decision to save each month based on a sound financial decision?
Be a smart consumer with your bank account! Understanding the comprehensive information made accessible in the report is the first step toward savings that could amount to thousands. After understanding and analyzing the information in the report, reach out to your banker to improve your terms.
Take control of your financial future today by reviewing your bank identity statement and discovering where you can save money and strengthen your financial position.
