The Bank of Israel Banking Supervision Department is easing some of the restrictions imposed on the banking systems after the collapse of Israel's banking system in the 1980s in the banking shares manipulation crisis. The Banking Supervision Department, headed by Supervisor of Banks Dr. Hedva Ber, has published a draft revision of the Proper Conduct of Banking Business Directive no. 332 that will enable the banks to buy back the securities that they have issued.
As part of a draft directive for buying bank shares by banking corporations, it is being proposed to cancel the ban on banks buying back their shares, thereby enabling banks and credit card companies to buy back their shares "subject to complying with certain terms. Until now, the directive prohibited banks from buybacks except in exceptional cases, while the Companies Law allows such a transaction for public companies," the Bank of Israel states.
The new directive also revises the restrictions applying to "providing credit secured by the bank’s shares… including activity in equity indices in respect of which the bank’s shares received as collaterals."
As of now, it is forbidden for banks and corporations controlled by them to finance the purchase of their shares or convertible bonds, except for financing share purchases by employees. The new directive therefore retracts some of the restrictions imposed on the banking system in accordance with the recommendations by the Beisky Commission appointed following the bank shares manipulation crisis and the collapse of the banking system in October 1983. Manipulation of shares by the banks at that time encouraged their customers to invest in the banks' shares on the stock market. The crisis, which greatly affected both the local capital market and the Israeli economy, was the culmination of many years of stock manipulation by the banks. The Beisky Commission published its report in April 1986, which dealt with the banks' involvement in trading in their shares at their own expense. The new directive does not, however, eliminate all of the restrictions imposed on the banks following the crisis.
Published by Globes [online], Israel business news - www.globes-online.com - on July 16, 2018
© Copyright of Globes Publisher Itonut (1983) Ltd. 2018