“The Association of Banks in Israel hired advisors with international reputations. In addition to their many objections to the Bachar committee recommendations, they made sure to point out that implementing the recommendations would strengthen the dominance of the duopoly of the two large banks,” United Mizrahi Bank (TASE: MZRH) CEO and former Bank Hapoalim CEO Eliezer (Eli) Yones told “Globes” today.
He added that it was astonishing that instead of trying to alleviate the lack of competition in banking, the Bachar committee was recommending measures that would further strengthen control by the two largest banks, without taking any steps to improve the current situation.
At a meeting yesterday with the chairmen of the three largest banks, Prime Minister Ariel Sharon said that agreements should be reached with the bank regarding the Bachar committee recommendations, senior banking sources said.
The sources added that Sharon and Prime Minister’s Office director general Ilan Cohen had stressed agreement in two principal areas: distribution fees and complete separation of the banks from the provident and mutual funds.
Bank Hapoalim (LSE: BKHD; TASE: POLI) chairman Shlomo Nehama, Bank Leumi (TASE: LUMI) chairman Eitan Raff, and Israel Discount Bank (TASE: DSCT) chairman Arie Mientkavich attended the meeting. The three men claimed that the plan was extremist, and asked that the banks be allowed to sell only minor portions of the mutual funds for five years, after which the plan would be re-evaluated.
The three chairmen claimed that the reform violated the fund members’ right of free choice, harmed competition, and increased the burden of fees on the public. Raff said that the same restrictions should be enforced on foreign banks operating in Israel at present and in the future.
Nehama commented that the banks had a legal opinion that intervention by the High Court of Justice was called for, in view of the harm to the property rights of Bank Hapoalim’s owners, who had acquired the bank without any warning of these measures.
The chairmen warned that no one would buy the mutual and provident funds, which would fall into the hands of insurance companies, which operate in a much more excessively concentrated and less supervised market.
Raff told “Globes” that he did not understand how the Bachar committee was handling issues of over-concentration. He claimed that Israel was ruled by the same laws of nature as other countries, and should not adopt measures that prevailed nowhere else in the world.
Bank Hapoalim published a response, which expressed regret over the recommendations, saying, “In our opinion, the committee erred considerably in its analysis, conclusions, and recommendations. Bank Hapoalim believes that a large proportion of the recommendations, if implemented, will lead to a major decline in the capital market, not reform.” The bank warned that that implementing the recommendations would deal a critical blow to the capital market.
First International Bank of Israel (TASE: FTIN1;FTIN5) CEO David Granot told “Globes”, “Without distribution fees, we won’t distribute provident and mutual funds. Those considering the purchase of these assets should take into account that the future distribution network will not function like the current one.”
According to Granot, it is illogical to remove the banks from a field that is at the core of every banking system in every well run country in the world. “It’s unreasonable, unnecessary, and a serious mistake, Granot said.
Published by Globes [online] - www.globes.co.il - on November 8, 2004