The change in the policy—under which there was a 5 percent upper threshold for bank equity holdings by the controlling shareholders of entities managing customer funds (provident funds, insurance companies, mutual funds and ETNs)—enables the controlling shareholders in such institutions to hold up to 7.5 percent of a banking corporation’s shares, subject to receiving a permit from the Governor of the Bank of Israel. The easing refers to such institutions in their capacity as entities acting on behalf of the general public and acting for financial, rather than strategic, motives. The previous upper limit prevented financial institutions from increasing their bank share holdings on behalf of the public, negatively impacting the tradability of bank stocks, and indirectly on banks’ market value as well.
An analysis of regulation generally accepted worldwide indicates that in a majority of advanced economies the holding percentage that requires receipt of a regulatory permit is 10 percent (such as in the UK, US, Canada, France, Belgium, and Switzerland) and in some countries it is even 15 percent (Austria, the Netherlands, Denmark, Germany, and others). As such, the Bank of Israel viewed it as proper to ease the holding constraint as noted.
The Supervisor of Banks, Dr. Hedva Ber, said, “We are implementing the policy that we previously announced, with extensive examination of the holdings structure in each of the groups that requests to receive a permit, in order to ensure that the permit that is granted reflects the policy goals—to enable the general public to increase its investment in bank stocks through institutions managing its money, and to support the increase in tradability of banks’ shares.”