21 July, 1997

Further Relaxation of Foreign-Exchange Controls

  • The upper limit on permitted financial investment abroad by provident funds has been raised to 5 percent of their assets.
  • The upper limit on permitted financial investment abroad by mutual (trust) funds has been raised to 50 percent of their assets.
  • The upper limit on holdings of foreign securities and foreign currency abroad by Israeli companies has been raised to 15 percent of their turnover or 25 percent of their equity capital, whichever is higher.
  • Institutional investors may henceforth undertake foreign securities transactions directly with a broker abroad.
  • All the restrictions on transactions abroad in futures by Israeli residents are annulled.
  • The amount of foreign currency a resident may remit to a nonresident or to an Israeli resident abroad either as a gift or as a support payment has been increased to $ 10,000 a year. In addition, the amount of $2,500 a month may be transferred to a student studying abroad.
  • Recipients of restitutions payments from Germany or of pensions from abroad may deposit these payments in overseas bank accounts.

The Bank of Israel today announced further relaxations of foreign-exchange controls, in the framework of the general liberalization of policy in this area, which has been approved by the Prime Minister and by the Minister of Finance. The Controller of Foreign Exchange stated that these steps constitute another stage in opening Israel's financial markets to competition, enabling them to integrate into the global money and capital markets

Financial investment abroad by provident funds: provident funds may now invest up to 5 percent of their assets abroad (formerly 2 percent).

Financial investment abroad by mutual (trust) funds: Israeli mutual funds which do not specialize in investment abroad may now invest up to 50 percent of their assets abroad (formerly 10 percent). To date, the Controller of Foreign Exchange has permitted only funds specializing in investment abroad to invest 50 percent of their assets abroad. Note that nonresidents' mutual funds are permitted to invest up to 75 percent of their assets in foreign financial assets.

The Controller of Foreign Exchange announced that the changes in permitted investments by provident funds will be made once the Commissioner of Capital Market, Insurance and Savings in the Ministry of Finance has published rules to that effect, and the Securities Authority has introduced the relevant changes in its regulations.

Foreign securities transactions by provident and mutual funds: provident and mutual funds may henceforth undertake financial transactions abroad directly with a broker abroad as well as via an authorized dealer bank in Israel, as has hitherto been the case.

Financial investment abroad by Israeli companies: Israeli companies may henceforth hold in an overseas bank account foreign securities and foreign exchange deriving from export proceeds, constituting up to 15 percent of their sales turnover or 25 percent of their equity capital, whichever is higher. Hitherto the limits were 5 percent of their sales turnover or 10 percent of their equity capital (whichever was higher).

Transfers abroad: a company that is active in Israel, or an Israeli resident who is at least 18 years old, may transfer foreign currency abroad or to a nonresident in Israel, up to the amount of $ 10,000 a year. To date, the amount of $ 2,000 a year could be transferred abroad, or amounts of between $ 250 and $ 500 a year could be given to a nonresident in Israel or a resident abroad, respectively.

Foreign-currency transfers to students studying abroad: a resident may remit foreign currency of up to $ 2,500 a month to a student studying abroad, instead of $ 1,000 to date. This permit is in addition to the amount of up to $ 10,000 a year that may be transferred abroad, as stated above.

Depositing restitutions from Germany or a pension received for work abroad in an overseas account: a resident who receives restitutions from Germany or a pension due to employment abroad may deposit such income in an overseas bank account. The Controller of Foreign Exchange pointed out that this permit does not apply retroactively. To date, residents had to repatriate all income from abroad (other than export proceeds) immediately upon its receipt.

Futures transactions abroad: a resident (except an insuring company) may undertake futures transactions abroad for any purpose, including transactions in permitted future commodities which have to date been permitted only in order to hedge against risk. In addition, a resident company (except an insuring company) may henceforth undertake such transactions directly with a broker abroad as well as via an authorized dealer bank in Israel. To date, resident companies have been permitted to undertake future transactions only in order to hedge against risks arising from import and export transactions, deposits or loans, or foreign securities.

The Controller of Foreign Exchange announced that these changes will go into effect immediately.