2006 will see a twofold increase in the number of foreign banks operating in Israel. The latest bank to receive approval in principle from the Bank of Israel for local operations is the State Bank of India (SBI). Sources expect this will be followed by approval for at least one more foreign bank to open in Israel this year.
”We have noticed an increasing willingness on the part of foreign banks to operate in Israel, a development that can be attributed to the stable economic environment and the recommendations of the Bachar committee on capital reform,” said Deputy Supervisor of Banks Avi Eckstein. “Foreign operators feel they release the brakes and expand their operations. The fact that a leading Israeli bank such as Bank Leumi (TASE: LUMI) was recently acquired by an overseas body such as Cerberus Capital Management LP, has helped in this regard.”
Banking sources have also attributed the interest by foreign banks to the recognition of Governor of the Bank of Israel Prof. Stanley Fischer as a leading figure in international banking circles. “A foreign bank usually starts by expressing preliminary interest, putting out feelers and familiarizing itself with the local banking system,” explained Eckstein, “this is followed by the opening of an office, not under the supervision of the Bank of Israel, which provides information to interested customers. The next stage is the opening of a fully fledged branch.”
In the late 1990s, many foreign banks opened offices in Israel and others considered expanding their activities. Plans to open branches were halted by the outbreak of the intifada in 2000. Around 15 foreign banks currently have offices in Israel, but only two, HSBC and Citibank are licensed to operate as a banking corporation. Both have local branches that are active in a wide range of banking services.
Ranked at the world’s 83rd largest bank The SBI is the largest commercial bank of its kind in India with 73 branches in 35 states. SBI initially considered the opening of an agency in Israel in 2003 but did not move the process forward at that time. The bank is set to open a branch in the Diamond Exchange in Ramat Gan.
French Bank BNP Paribas (BNP) is also said to be interested in opening a branch and launching full banking operations in Israel. BNP has had a presence at agency level in Israel since 1996. The bank’s local representation has been classed as a ‘business consulting office’ serving as an information point for customers who are then referred on to the bank’s branches in France.
Published by Globes [online], Israel business news - www.globes.co.il - on February 27, 2006