Now it becomes official, the committee for examining competition in the credit market has sent an official recommendation to the Minister of Finance to separate the credit card company “Kal” from Discount Bank “in order to increase competition in the financial system in Israel”.
The committee’s decision was made despite a minority opinion by the supervisor of the banks, Yair Avidan. According to the committee, “Discount Bank was not a factor generating competition in the banking system. This is contrary to the intention of the Strom Committee in its original decision to exclude Discount from the obligation to separate from the credit card company it owns.”
The committee also says that although “it is not possible to examine the full effect of the separation of the credit card companies at the economic level, the examination showed that the separation increased competition and reduced the concentration in the banking system, including the consumer credit market, and it even appears that the change in the incentives of the credit card companies had a positive effect and is expected to continue to have a positive effect on their competitive behavior. Finally, an examination of the data revealed that Cal operates relatively aggressively in the markets where it competes against the separate credit card companies only, while in the other markets where it operates against the banking system in general and the parent company Discount in particular, it does not operate effectively to increase competition and reduce centralization in the economy.”
The committee believes and hopes that the separation will increase the number of players in the market and therefore “is expected to have a positive effect on competition in the banking market, including in the consumer credit market, significantly”.
The committee is chaired by the director general of the Ministry of Finance, Ram Belinkov, and the head of the research division at the Bank of Israel, Michel Stravchinsky, and its members include the supervisor of banks Yair Avidan, the commissioner of competition, Michal Cohen, the commissioner of the capital market, Amit Gal, The head of budgets at the Ministry of Finance, Yogev Gerdos, and the head of payment systems at the Bank of Israel, Oded Salomi.
The Director General of the Ministry of Finance, Ram Belinkov, said following the decision: “The findings presented to the committee indicate that the proposed change may contribute to the incentive of Cal and Discount to challenge the balance that exists in the worlds of payments and credit, in a way that will lead to a reduction in centralization and an increase in competition in the credit market, which will be reflected in the credit offered to the consumer “.