The Bank of Israel is proposing to amend the Banking Law (Licensing) (5741-1981) to allow Israeli banks and the local branches of foreign banks which, in the opinion of the Banking Supervision Department, have no substantial retail business to own stakes in mutual and provident fund management companies. The Bank of Israel says that the amendment is aimed at encouraging activity by foreign banks, not the activity of small Israeli banks that are subsidiaries of larger banks.
The amendment will be in the form of legislation. Foreign banks will allowed to manage mutual and provident funds, business that Israeli banks have been banned from since the Bachar capital market reform of 2005. Five foreign banks currently operate in Israel: Citigroup Inc. (NYSE: C), HSBC Holdings plc (LSE: HSBA; HKSE: 005; NYSE, Paris: HBC), BNP Paribas SA (Euronext: BNP), Dexia (Euronext: DXB; LSE: DEX), and the State Bank of India.
The proposal is buried inside an amendment to the Banking Law which aims to increase competition in the credit card market and full cross clearing of credit transactions, which was submitted to the ministerial legislation committee in July. There is no relationship between the two issues.
Paragraph 6 of the proposed amendment will amend Paragraph 27 (9) of the Banking Law (Licensing), which will cease to apply to "a bank, a foreign bank, or controlling party of one of them, if in the opinion of the supervisor, no material retail business is conducted at its branches in Israel, according to the conditions set by the supervisor of these matters: the maximum number of the customers of the bank or foreign bank at its branches in Israel, the maximum amount of customer deposits, and the maximum amount of customer credit in Israel held by the bank."
The amendment stipulates that the Supervisor of Banks will publish on the Bank of Israel's website the terms that will be set out, and which bank meets the terms, and why.
Article 27 of the Banking Law (Licensing) was amended as part of the Bachar reform to ban banks from owning mutual and provident funds or more than 10% of a company that controls such funds.
Published by Globes [online], Israel business news - www.globes-online.com - on September 6, 2010
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