The Bank of Israel will not support a proposal by Israel Securities Authority chairman Moshe Tery to ban banks from issuing structured products, and to limit them only to marketing them.
Banking sources think that Tery’s proposal is too sweeping and will harm the banks. They note that Tery did not coordinate the proposal with Supervisor of Banks Rony Hizkiyahu in advance, as required under last June’s memorandum of understanding between the two regulators.
The Banking Supervision Department plans to hold a series of meeting with the banks to listen to their positions in order to respond to the Securities Authority’s proposal. The deadline for the response is November 15. Sources at the Securities Authority said that a Bank of Israel representative participated in its meetings and signed the report.
Bankers, not surprisingly, are angry at Tery’s proposal. One top banker said, “This is another measure aimed solely at cutting the power of the banks and increasing the power of the insurance companies and brokers, while increasing market concentration and conflicts of interest. Naturally, no one spoke or consulted with us.”
Another banker said that the proposal was a basic error by the Securities Authority. “Banks everywhere in the world issue structured products. Only in Israel are they banned from doing so. The Securities Authority has a strange idée fixee to sever the link between the goods and the seller. This will not benefit the consumer, because the issuing companies lack the banks’ strength and stability,” he said.
The banks note that the proposal will have to obtain approval of the Ministry of Finance and then undergo the legislative process, including approval of the Knesset Finance Committee. This is a lengthy procedure and there is no assurance that the proposal will ever survive.
Last week, the Securities Authority published the interim conclusions of the team appointed to examine regulation on complex financial products. Next month, the Ariav committee on further capital market reform, headed by Ministry of Finance director general Yarom Ariav, will begin working. Tery’s successor will be a member of this committee. The issuing of structured products will likely be one of the topics to be taken up.
Published by Globes [online], Israel business news - www.globes.co.il - on October 29, 2007
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