Economy minister: Mizrahi Union Bank merger won't boost competition

Eli Cohen Photo: Dudi Vakhnin

Eli Cohen opposes the merger between Mizrahi Tefahot Bank and Union Bank.

"For the Bank of Israel, supervising fewer banks is more comfortable, maybe even easier, but it runs counter to the consumer interest and the trend towards bolstering competition in the banking system," Minister of Economy and Industry Eli Cohen (Kulanu), who headed the committee that approved the Promotion of Competition and Reduction of Concentration Law, told "Globes" today.

Cohen unequivocally opposes the merger between Mizrahi Tefahot Bank (TASE:MZTF) and Union Bank of Israel (TASE: UNON), and attacked Supervisor of Banks Hedva Ber's support for the merger. Cohen will not say so, but it is believed that Minister of Finance Moshe Kahlon shares his opinion, although Kahlon has not yet expressed his opinion on the issue. In preparation for the upcoming Knesset Finance Committee hearing, committee chairman MK Moshe Gafni (United Torah Judaism) announced that he intended to summon Antitrust Authority director general Michal Halperin to hear her opinion about the merger and its consequences.

"The merger between Union Bank and Mizrahi Tefahot Bank is first of all contrary to the spirit of the Promotion of Competition and Reduction of Concentration Law, which was based on the Strum Committee's recommendations, approved, and enacted," Cohen explained.

Ber says that a merger between the small-sized and a medium-sized bank will increase competition by creating a third bank that will challenge the two major banks, Bank Hapoalim (TASE: POLI) and Bank Leumi (TASE: LUMI), and that this will be good for the customers.

"This was also the Bank of Israel's view in previous mergers, and it would be difficult to assert that it has been borne out. Furthermore, it is a proven fact that the merger of small banks into big banks, as has happened in quite a few previous cases, contributed nothing to increasing competition in the banking system. Mergers are not the right way; they are the opposite of the right way. In addition, while the Bank of Israel is again talking about lightening the requirements for new banks, in practice it is doing exactly the opposite; it is contracting the existing banks and increasing concentration. In practice, with this merger, the central bank is continuing the trend towards consolidation during the past 47 years, in which not a single new bank was opened in Israel, and one of the Western world's most concentrated banking system was created in Israel," Cohen argued.

"Globes": What do you expect from the Bank of Israel and the Supervisor of Banks?

Cohen: "The Bank of Israel and the Supervisor of Banks have to push through easier requirements for founding new banks, and to preserve the existing small banks and help them compete in the banking system."

Published by Globes [online], Israel Business News - www.globes-online.com - on September 4, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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Eli Cohen Photo: Dudi Vakhnin
Eli Cohen Photo: Dudi Vakhnin
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