The Bank of Israel is changing its policy, under which the upper threshold for the controlling shareholders’ holdings of banks shares in institutions managing customers’ funds (provident funds, insurance companies, mutual funds, and exchange traded notes) is 5 percent, and from now on will allow controlling shareholders in such institutions to hold up to 7.5 percent of the shares of a banking corporation, subject to receiving a permit from the Governor of the Bank of Israel. The leniency refers to such entities in their role as entities acting on behalf of the general public and through financial rather than strategic motives.
The decision was reached after the Supervisor of Banks consulted with the Licenses Committee. The new policy goes into effect as of today.
Many institutional investors who approached the Banking Supervision Department emphasized that as of today, the holding limit of 5 percent prevents them from increasing their holdings of bank shares on behalf of the public. This also adversely impacts the negotiability of banks’ shares, and indirectly on banks’ market values.
Analysis of regulation generally accepted worldwide indicates that in the majority of advanced economies the holding stake that requires receipt of a regulatory permit for holding shares is 10 percent (for example, in the UK, US, Canada, France, Belgium, Switzerland, and others) and in some countries it is even 15 percent (Austria, the Netherlands, Denmark, Germany, and others). In light of all these, the Bank of Israel views it as appropriate to ease the holding limit as noted.
The Supervisor of Banks, Dr. Hedva Ber, said, “The leniency that we decided on in the policy regarding granting holding permits will enable the general public to increase its investment in bank shares through the institutions managing its money, and will support increased negotiability of the banks’ shares.”