Israel's financial sector is highly concentrated. At the end of 2003, its assets totaled NIS 1.25 trillion, 2.5 times Israel's GDP, according to the Bank of Israel's Financial Stability Report for 2003 to be published on Sunday.
According to the report's data, the financial sector in Israel comprises some 200 institutions, but most of the activity is accounted for by five banking groups, which also own the provident funds, the five largest insurance groups, and the former Histadrut (General Federation of Labor in Israel) pension funds.
The Bank of Israel says the high degree of concentration in the financial sector is due, among other things, to cross-ownership, and same control and management across different institutions of the same type, and also across the entire financial sector. The data show that the share of the two largest entities in the financial sector of the total assets is 48-94%, while the share of the five largest entities is 78-98%.
Israel's four largest banking groups are also its largest financial institutions. The five largest financial institutions in Israel account for 78% of the financial sector's total assets.
The two largest banking groups, Hapoalim and Leumi, hold 49% of the financial sector. The proportion accounted for by Hapoalim and Leumi together with their mutual funds is 52%. The proportion accounted for by the five largest financial institutions together with the mutual funds is 81%.
The Bank of Israel points out that the concentration in the pension funds, which were owned by the Histadrut until they were nationalized, is the highest. The three largest former Histadrut pension funds, Makefet, Mivtachim, and Metavit, controlled 83% of the capital of the old pension funds (established before January 1, 1995), and 75% of the capital of the new funds (established on or after January 1, 1995).
The Bank of Israel stresses that the Israeli banking system is one of the most concentrated in the world. Bank Hapoalim and Bank Leumi's share of total bank assets is 60%, and that of the five largest banking groups is 94%.
Israel's insurance industry is also very highly concentrated. The two largest insurance groups hold about half the total assets, while the five largest groups hold 84% of the total assets.
Concentration in life insurance is even higher. The two largest insurance groups account for 65% of gross premiums, while the five largest companies account for 95% of gross premiums.
Published by Globes [online] - www.globes.co.il - on June 30, 2004