After years of decline in the number of non-bank Tel Aviv Stock Exchange (TASE) members, and following a four-year trial of the current equity requirements, the TASE is acting to make the equity model required from non-bank members easier to meet. Sources inform "Globes" that the TASE presented representatives of the non-bank members with a work plan for reducing their equity and liquidity requirements in order to accommodate their business and narrow the gap with the requirements for the banking system. As far as is known, the TASE, managed by CEO Yossi Beinart, intends to formulate the rules for equity and liquidity by the end of the year, and put them into effect in 2016.
The current model has existed since early 2011, and market sources say it is "conservative in comparison with what is practiced in similar countries." In addition, the model to which the non-banks are subject is not the same as the one applying to the banks operating in this field, which in recent years have enjoyed an advantage over their non-bank competitors. "The distinction between banks and non-banks discriminates against the non-banks, creating regulatory arbitrage in favor of the banks," sources at the TASE and the non-banks explain.
The TASE has hired an external consultant firm, and has conducted a comparative study with the US, Europe, and Australia. The new model to be designed will be adapted to the European model, which rests on the Basel rules for the banking system. The TASE also plans to release capital for the non-banks in the hope that this will make it easier for them, and induce them to increase their activity in the market, for example by increasing customer credit, while improving their standing as alternatives to the TASE banking members. In addition to equity, the requirements to be eased also include the level of liquidity and the makeup of assets that will make it possible to meet the relevant equity requirements in the TASE regulations.
"A welcome measure"
The non-bank members are welcoming the measure. "The current situation is a problem," says a senior market source, but adds, "It is premature to say whether this will help any particular TASE member, even though it is a praiseworthy measure." Another senior source also welcomed the move, but added, "More than a few TASE members have closed down over the years, and revising the equity model is likely to strengthen the existing members and encourage new ones. This will improve competition with the banks."
In another measure, the TASE is expected to make concessions on the "haircut" according to which the TASE 25 Clearing House members deposit collateral. This reduces the difference between the value of the security deposited and its market value, which is designed to represent the potential value of the securities transferred as collateral in cases of a steep drop in their price.
Published by Globes [online], Israel business news - www.globes-online.com - on June 24, 2015
© Copyright of Globes Publisher Itonut (1983) Ltd. 2015