In the past few months, credit cards have become one of the hottest items on the Israeli market. This morning, Minister of Finance Bezalel Smotrich announced that CAL-Israel Credit Cards Ltd. will be separated from Israel Discount Bank (TASE: DSCT), which controls it with a 72% stake. First International Bank of Israel holds the other 28%. The purpose of the decision is stated as creation of greater competition.
In the background, both of CAL’s competitors happen to be in the process of being sold. The sale of Max (formerly Leumi Card) to Clal insurance is expected to close within the next few weeks, while Isracard is in talks with Harel, a competitor of Clal in the insurance market, after the period of time set for the negotiations was extended.
The Ministry of Finance explained that as part of its policy of creating greater competition in the banking and credit market, the minister of finance had decided to exercise his authority and change the definition of a bank with a large scope of activity, and in effect to determine that Discount Bank must divest itself of CAL. The decision was made on the recommendation of a committee that was set up to examine the matter.
The committee was made up of representatives of the Bank of Israel, the Competition Authority, the Israel Securities Authority, and the Ministry of Finance itself. It recommended by a majority of eight to one that the minister of finance should exercise his power under the law and lower the threshold for defining a bank as "a bank with a large scope of activity" in a way that would oblige Discount Bank to divest from its holding in CAL. The recommendation came in the light of the experience of separating Max from Bank Leumi and Isracard from Bank Hapoalim , estimates of the effect of separating CAL from Discount Bank, and the view that increasing the number of players would substantially benefit competition in the credit market.
Published by Globes, Israel business news - en.globes.co.il - on January 19, 2023.
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