Yesterday's report in "Globes" that an initiative was forming in the Knesset to require approval from the Ministers of Finance and Economy and Industry for bank mergers has raised storm. This measure, if it goes through, will prevent the emerging merger between Union Bank of Israel (TASE: UNON) and Mizrahi Tefahot Bank (TASE:MZTF). Yesterday, shortly after the report appeared in "Globes," MK Roy Folkman (Kulanu) announced that a bill on the matter that he had drafted together with Minister of Economy and Industry Eli Cohen had been submitted.
The bill provides that deals in which the banks being merged jointly hold a market share of over 10% will be subject to approval by the minister of finance and the minister of economy and industry. The bill follows the deal signed last week for the sale of Union Bank and its merger with Mizrahi Tefahot Bank. Under current law, the deal requires approval from the Bank of Israel, which has already announced its support for the merger, and the Antitrust Authority, which has yet to decide on the matter, and has actually yet not begun to officially address it.
Politicians, on the other hand, have expressed opposition. Last week, Minister of Finance Moshe Kahlon announced that he opposed the merger. The Knesset, however, is not confining itself to statements. High ranking Kulanu Party members are pushing a bill designed to prevent the deal.
"This bill should put everyone on alert. They are taking away the regulator's independence. The Antitrust Authority's role is to examine whether mergers harm competition in a given sector. What they are saying is that they do not trust the Antitrust Authority's judgment," a senior legal source told "Globes."
"The regulators' status is being eroded. As soon as this deal was publicized, politicians were already speaking against it with unprecedented vehemence. They did not give the Antitrust Authority a chance to analyze and assess the consequences of such a deal," a financial system source adds.
In the political arena, on the other hand, opinions were of course voiced in support of the bill. "The bill is not designed to detract from the Antitrust Authority, which deals with a variety of subjects and sectors. The bill in effect delivers a message to the Bank of Israel that it should be seeking to reduce over-concentration in the banking system, and should not increase it by reducing the number of players," one political source said.
Some MKs are saying that it is currently difficult to obtain a banking license, and that fact is that no new banking license has been issued for decades. They believe that letting an existing license be lost is therefore unacceptable, and that a measure such as the current bill is a legitimate means of attaining their objective.
The bill was submitted in the Knesset yesterday, and it is still unclear whether it is merely a means of exerting pressure, or whether Cohen and Folkman will go through with the legislative process. It is believed that if the Bank of Israel takes any forceful step that will significantly improve competition in the banking system, or changes its attitude towards the Union Bank merger, the bill may be withdrawn. When the bill was reported yesterday, Folkman said, "The number of players in the banking market is small, and the number of them that hold a significant market share is even smaller. Every player in the market is therefore important."
"Bank mergers run counter to the spirit of the Promotion of Competition and Reduction of Concentration Law and the recommendations of the Committee on Increasing Competition in the Banking and Financial Services (the Strum Committee)," Coehn said. "Merging banks has not proved effective up until now, and has made no contribution to intensifying competition."
Published by Globes [online], Israel Business News - www.globes-online.com - on December 7, 2017
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