The Bank of Israel intends to fundamentally change the rules for party at interest shareholders of banks with no controlling shareholder. For example, an affiliated party in such a bank will be defined as a party with a 2.5% stake - half the current 5% stake. The bank will publish the shareholder's identity, its deposits, and the credit received. Credit restrictions will also be tightened for these shareholders. In some cases a shareholder with a 1% stake might defined as an affiliated party.
These new rules, once adopted, will only apply to Bank Leumi (TASE: LUMI). But in future, if, as expected, controlling cores in the other banks disappear, the Bank of Israel believes that the new rules will apply to most of the country's banks.
This could happen if Zadik Bino sells his controlling interest in First International Bank of Israel (TASE: FTIN), if the Bronfman family foregoes its control permit for Israel Discount Bank (TASE: DSCT); and if the controlling core in Mizrahi Tefahot Bank (TASE:MZTF) is broken up, on the basis of the recommendations of the Committee on Concentration in the Economy.
Preventing control from below
Immediately after the Knesset passed the Marani law, officially Amendment 13 to the Banking (Licensing) Law (5741-1981), which regulates a bank with no controlling core, Supervisor of Banks David Zaken launched the staff work to amend Proper Conduct of Banking Business Regulations No. 312 "A banking corporation's business with related parties". The objective is to prevent a situation in which a bank with no controlling core could be controlled from below by relatively small shareholders with stakes larger than 2.5%, by influencing a bank's conduct without responsibility or transparency vis-à-vis the Bank of Israel or the public.
Bank Leumi shareholders who could be affected by the new regulations:
Published by Globes [online], Israel business news - www.globes-online.com - on March 12, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012