At next Sunday's cabinet meeting, Prime Minister Ariel Sharon will propose instructing Ministry of Finance director general Dr. Joseph Bachar and Prime Minister's Office director general Ilan Cohen to formulate by year-end a joint plan for implementing the capital market reform.
Sharon is expected to support Bachar committee recommendations to completely sever the mutual and provident funds from the banks. This means that Sharon is rejecting lobbying by the banks, including lobbying by Bank Hapoalim chairman Shlomo Nechama, an associate of Sharon. Sharon will also propose implement the capital market reform within three to four years: three years for the banks to sell their provident funds, and four years to sell their mutual funds.
Some ministers intend to support the Bachar recommendations in full, while others support the banks' position regarding distribution fees and the time frame for selling their mutual and provident funds. Some ministers will propose allowing the banks to continue owning 20% of mutual and provident funds, as earlier proposed by the Brodet committee, or even 30-50% of the funds, and reviewing the matter in five years.
Sharon will ask the cabinet to instruct Cohen and Bachar to develop a model for distribution fees, while examining similar situations in Western countries and preserving the principle of avoiding built-in conflicts of interests. Bachar and Cohen will be instructed to prepare a bill for supervising the provident funds' management and investments.
Bachar and Cohen will also examine options for converting mutual and provident funds into public companies as part of their sale, and right at the start of the process. The process could be carried out by listing mutual and provident funds' shares on the Tel Aviv Stock Exchange (TASE), while they are still controlled by the banks, or by formulating transparency rules for the funds that meet Israel Securities Authority reporting conditions.
Published by Globes [online] - www.globes.co.il - on November 11, 2004