Moshe Barkat confronted supervisors, but did not implement major reforms

by time news

The Commissioner of the Capital Market, Insurance and Savings Authority, Moshe Barkat, unexpectedly announced yesterday to Finance Minister Avigdor Lieberman that he wishes to retire after 4 years. Barkat, who will leave in two months, was appointed by former finance minister Moshe Kahlon, and was supposed to serve until 2023.

Barkat replaced Dorit Salinger, who held the position in 2013-2018, and during her tenure the Capital Market Authority became an independent body separated from the Ministry of Finance. The supervisor arrived equipped with all the appropriate tools for the job. Barkat has proven and successful experience in the Israeli capital market as the chairman of the Phoenix, he also has experience in academia, as a lecturer and researcher at the Graduate School of Business Administration at Duke University, and finally has regulatory experience as director of the corporate department at the Securities Authority. However, despite the promising data, it seems that Barkat has not He will leave a significant mark, among other things due to the political instability that prevailed during his time and made it difficult to carry out significant reforms that required legislation.

The reform of the objective agent will not be realized: unlike Salinger, Barkat is considered the insurance commissioner who was biased towards business freedom while maintaining the general interest of the savers, and not as one who promotes preventive regulation. And so, during his tenure, the combined market value of the five largest insurance companies crossed the NIS 30 billion mark for the first time. Barkat will be remembered as the supervisor under whom, mainly with the help of boom years in the stock market, the public funds supervised by the Capital Market Authority crossed the NIS 2 trillion mark, and the proportion of public funds supervised by the Authority rose for the first time to over 50% – the largest share in the financial system. However, it seems that unlike Salinger, Barakat will not have a substantial reform that will be recorded in his name in the history of long-term savings.

The Capital Market Authority supervises the institutional bodies in general, alongside supervision of the terms of the insurance policies and the pension funds. In the field of long-term savings, Barkat is responsible for recruiting two new players to the pension industry, Moore and Infiniti, which are supposed to increase the supply of funds and push prices down, but these are actually covering up the loss of Psagot and Hellman-Aldobi. The two players did not come for free, and Barkat had to flex the management fee terms for new savers.

A reform that will be damaged and not realized is the reform of the objective agent, which Barakat tried to pass at the beginning of his term. This was supposed to end the celebration of the insurance agents, who enjoy royalties of thousands of shekels for every policy sale and transfer of a customer from company to company, while harming the interest of savers. Approval of the reform required legislation in the Knesset, but the authority was unable to fight the representatives of the insurance agents in Jerusalem and pass it.

In the field of health, Barkat tried to pass a reform last year that obliges insurance companies to offer policyholders uniform private insurance policies – “thin” policies that will focus on “catastrophes” that are not covered by the health basket and allow comparison between the companies. The reform is supposed to take place next year, and according to the Capital Market Authority it will not be affected by his early retirement.

During his tenure, Barkat did not hesitate to confront his supervisors, led by the controlling owner of the insurance group Migdal Shlomo Eliyahu, who repeatedly challenged various regulations. Barkat even resulted in Eliyahu leaving the board of directors of Migdal Insurance, in order to keep his place in the parent company of Migdal Holdings. Barkat also intervened in conflicts between Clal Insurance executives, which ended with the retirement of the then chairman Danny Neve.

The Authority was not defined as a statutory corporation: why is Barkat leaving earlier than expected? Apparently it’s about money and honor. A hint of the first reason can be found in the report that the Authority submitted at the end of 2021 for the conclusion of 2020, in which Barkat’s criticism of its situation became more tangible: “The Capital Market Authority has reached a discouraging low in adjusting the resources allocated to it to increase the scope of its activities and to be required to perform its duties,” the report states. In other words, despite its importance and the increase in the scope of its activities, the authority was not defined as a statutory corporation that operates autonomously and is responsible for its budget, in contrast to the Securities Authority and the supervision of banks. This harmed the Authority’s resources and reduced the scope of jobs that Barakat could offer and the remuneration of the employees. The authority’s under-budgeting, as Barkat clarified before the Finance Committee in 2021, harms its long-term functioning and puts it at a disadvantage compared to the other financial supervisors.

The rift regarding the authority’s status and its under-budgeting has even deepened in the past two years, with the acceptance of supervision of the banking systems in the areas of credit, currency services and exchanges – a move that added to it thousands of entities that requested a license to operate under regulated supervision. The move damaged the authority’s prestige, which moved to dealing with tiny entities, caused the workload to worsen and ate into its budget.

Senior executives in the insurance industry believe that the reputation Barkat gained as an inspector will benefit him if he does return to one of the largest insurance companies – and of course his salary will improve. In the last 4 years, his salary was equivalent to that of the CEO of a government office, about NIS 43,000 a month, and if he does get a senior position in an insurance company again, he should earn up to six times as much.

The last straw in the honor issue is the deliberations of a special committee of the Treasury, which examines the structure of financial supervision. The tendency at the moment is to recommend a merger between the Capital Market Authority and the Securities Authority, regarding the supervision of the non-banking entities – a move that has the power to significantly weaken the Capital Market Authority.

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