The Bank of Israel and the Ministry of Finance have laid the regulatory groundwork for the decentralization of a bank's controlling core, i.e. a situation in which a bank's controlling shareholder wants to sell its stake, but not to a successor controlling shareholder, with the result that the bank will not have a controlling core.
The banking sector believes Israel Discount Bank's (TASE: DSCT) controlling shareholders - the Bronfman family and Rubin Schron - will exploit the new regulations, as they have wanted to sell their stakes for a long time.
Other bank controlling shareholders who may be required to sell their shares under the new regulations are First International Bank of Israel (TASE: FTIN) controlling shareholder Zadik Bino and Mizrahi Tefahot Bank (TASE:MZTF) controlling shareholder Leora Ofer. They may choose to do so, in order to meet with the recommendations of the Committee on Concentration in the Economy, which bans control of both substantial financial and non-financial companies.
Supervisor of Banks David Zaken and Supervisor of Capital Markets, Insurance and Savings Prof. Oded Sarig also published a joint document setting out seven guiding principles for the criteria and general terms for controlling shareholders and applicants for a control permit at a bank, insurance company, or financial institution. They are as follows:
- The minimum holding for control of a supervised company as a function of the size of the bank or insurance company.
- Capping the difference between the equity interest of the controlling shareholder in a supervised company and the controlling stake in it.
- Rules and restrictions on corporations through which a controlling shareholder may hold a supervised company, in order to ensure stability in the chain of control.
- The shareholders' equity threshold for an applicant for a control permit, as a function of the size of the investment in a supervised company.
- Restrictions on how the investment to acquire a bank or insurance company is financed.
- A commitment by the members of the controlling core to inject capital into the supervised company they control, under terms and in amounts to be set by the relevant regulator.
Published by Globes [online], Israel business news - www.globes-online.com - on April 18, 2012
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