Insurance companies may have difficulty obtaining Visa and MasterCard permits.
Banking sector sources have warned against taking credit card issuance out of the jurisdiction of the banks, adding that it could create difficulties in obtaining issuer permits from the two leading international credit card companies, Visa Inc. (NYSE: V), and MasterCard Inc. (NYSE: MA). The Ariav Committee is currently considering the involuntary separation of credit car issuance from the banks, in a similar fashion to the ending of the banks' control over mutual and provident funds recommended by the Bachar Committee on capital market reform.
Credit card companies in Israel operate on the basis of a license from the international companies whose cards they issue. The permit requires, among other things, an undertaking by the bank owning the company to indemnify its credit card issuer subsidiary. Such indemnification would be immediately voided in the event that a credit card company is acquired by an insurance company, which would have to obtain a license from the international credit card company in question and provide it with appropriate securities and collateral.
At present, most of the issuers of Visa and MasterCard credit cards in Israel are banks. The international companies have a clear preference for banks as issuers, because of their financial strength. At the end of last year, MasterCard Europe president Javier Perez visited Israel and met MK Gilad Erdan (Likud), who has tabled a bill proposing the separation of the credit card companies from the banks.
Published by Globes [online], Israel business news - www.globes-online.com - on April 7, 2008
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