Israel Discount Bank Ltd., the country’s fourth-largest lender, will have to divest its CAL credit card business as part of government policy to spur competition in the credit and banking sectors, the finance minister announced Thursday , Bezalel Smotrich.
Smotrich said he decided to draft amended regulations that will force Discount Bank to sell its credit card business, which in turn will allow a new player to enter the over-concentrated credit market and lead to greater competition for households and small businesses.
“This step, combined with additional steps we will take soon, will lead to a competitive credit market and contribute to economic growth,” Smotrich said.
Smotrich has passed a draft regulation to Bank of Israel Governor Amir Yaron, who has given his consent, and they are now awaiting approval from the Knesset Finance Committee, the finance ministry said in a statement.
A committee had been set up to make recommendations in this regard, consisting of representatives of the Bank of Israel, the Competition Authority, the Capital Markets Authority and the Ministry of Finance. Seven of the eight members of the committee recommended that the finance minister exercise his authority to lower the threshold set by law to define a “bank with a broad scope of activity”, in a way that will require Discount Bank to spin off the their holdings in CAL. The committee concluded that the measure would increase competition and reduce concentration in the banking system, including in the consumer credit market.
Discount Bank owns 71.8% of CAL’s capital and the rest of the credit card company’s shares are owned by First International Bank of Israel (FIBI). Commenting on Smotrich’s order, Discount Bank said that “the decision to separate CAL from Discount, which still requires the approval of the Knesset Finance Committee, is wrong and will certainly not increase competition in the banking system” .
An illustrative image of a stack of credit cards. (alexialex; Getty Images iStock)
“The Discount Group will continue to generate significant value for its shareholders even in the face of this decision,” the bank said in a statement.
Smotrich’s decision comes after Israel’s two largest lenders, Bank Leumi and Bank Hapoalim Ltd. were forced to sell their credit card units in recent years under the Law to Increase Competition and Reduce Concentration in Israel’s Banking Market. The law is part of a reform based on the recommendations of the Strum Committee which was formed in June 2015, and includes important changes to increase competition, such as allowing non-banking companies to offer credit to consumers and separating the ownership of credit card companies. of the banks.
Smotrich also announced plans to appoint a ministerial committee tasked with examining whether there is a problem with large institutional bodies controlling debit card companies. The committee, which is expected to present its recommendations in the coming weeks, will be constituted taking into account “the potential impact of recent developments on the ownership structure of separate credit card companies,” the ministry said .
Earlier this month, Harel Insurance Investments & Financial Services Ltd. made a bid to acquire Israeli credit card business Isracard in a deal valued at 2.7 billion NIS ($790 million). Meanwhile, Clal Insurance Enterprise Holdings Ltd. is in the process of buying Israeli credit card company Max from its majority shareholder, American private equity firm Warbus Pincus LLC, in a deal worth NIS 2.5 billion.
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