In
accordance with the new policy published by the Bank of Israel in June 2016, a permit was issued by the
Governor today to the controlling shareholders of a financial group managing customer
funds who applied to receive a permit to hold up to 7.5 percent of the means of
control in a banking corporation. The permit, which was issued on the basis of
the published policy, limits, among other things, the total means of control in
banks held by any individual company in the financial group that received the
permit, such that it shall not exceed 5 percent of a banking corporation’s
equity, whether for their customers or for themselves, and limits the financial
group’s total holding in the means of control in a banking corporation to 7.5
percent. Additional requests submitted to the Bank of Israel are still being
examined.

 

The
change in the policy—under which there was a 5 percent upper threshold for bank
equity holdings by the controlling shareholders of entities managing customer
funds (provident funds, insurance companies, mutual funds and ETNs)—enables the
controlling shareholders in such institutions to hold up to 7.5 percent of a
banking corporation’s shares, subject to receiving a permit from the Governor
of the Bank of Israel. The easing refers to such institutions in their capacity
as entities acting on behalf of the general public and acting for financial,
rather than strategic, motives.  The
previous upper limit prevented financial institutions from increasing their
bank share holdings on behalf of the public, negatively impacting the
tradability of bank stocks, and indirectly on banks’ market value as well.

 

An
analysis of regulation generally accepted worldwide indicates that in a
majority of advanced economies the holding percentage that requires receipt of
a regulatory permit is 10 percent (such as in the UK, US, Canada, France,
Belgium, and Switzerland) and in some countries it is even 15 percent (Austria,
the Netherlands, Denmark, Germany, and others). As such, the Bank of Israel
viewed it as proper to ease the holding constraint as noted.

 

The
Supervisor of Banks, Dr. Hedva Ber, said, “We are implementing the policy that
we previously announced, with extensive examination of the holdings structure
in each of the groups that requests to receive a permit, in order to ensure
that the permit that is granted reflects the policy goals—to enable the general
public to increase its investment in bank stocks through institutions managing
its money, and to support the increase in tradability of banks’ shares.”​

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