Israel Bank Opens Door for Insurance Companies to Establish Small Banks

SadaNews Economy - The joint ministerial team formed by Finance Minister Bezalel Smotrich and Bank of Israel Governor Professor Amir Yaron has recommended allowing holding companies of insurance firms to obtain licenses to establish flexible small banks.

According to the Hebrew economic newspaper Calcalist, as translated by SadaNews, "Insurance companies are permitted to own small banks that do not exceed 2.5% of the total assets of the banking system, with the possibility of raising the limit to 5% with special approval from the Finance Minister and the Governor."

The report continued: "Companies like 'Phoenix' (via Gamma), 'Minora' (via ERN), 'Migdal Holdings', and 'Harel' will be eligible to obtain the license."

Additionally, other institutional entities such as investment houses 'Metav' and 'Mor', as well as non-banking credit companies like 'Peninsula' and 'Navi', can apply for the license.

Among the regulatory advantages for small banks are: exemption from the salary cap for senior executives during the first ten years, and offering general insurance services such as life and home insurance.

This is in addition to an exemption from open banking obligations and transferring customers between banks during the first three years.

There is also an exemption from the commitment to banking commission ratios during the first five years.

Moreover, there will be a reduction in regulatory restrictions appropriate to the size of activity and risk, to encourage new players to enter the market.