The team to examine the competition in the credit market, led by the Ministry of Finance and with the participation of the financial regulators, recommends that the Minister of Finance promote the move to separate the credit card company from the discount bank. The draft decision was drawn up today (Sunday), and a reference to it can be forwarded in the next two weeks.
This issue will be one of the first issues on which the new Minister of Finance will have to decide, as the timetables for advancing the decision are tight. The Strom Law stipulates that by the end of January 2023 it must be decided whether to order the separation of Cal from Discount. The decision requires the approval of the Minister of Finance and the Finance Committee.
The team’s decision is not surprising, since the Bank of Israel announced last month that it supports the separation, and the Ministry of Finance and the other regulators (the Competition Authority and the Capital Market Authority) already wanted to promote the process of separation, but had to wait for the Bank of Israel’s position.
This decision is actually a continuation of Strom’s law from five years ago. The Strom Law stated that Hapoalim and Omi must sell Isracard and Omi Card which were under their control. Leumi Card was sold to the Warburg Pincus Foundation, changed its name to Max, and is currently in the process of selling it to the Clal Insurance Group. On the other hand, Bank Hapoalim decided to issue Isracard on the stock exchange, and turn it into a company without a controlling interest. As part of the law, it was determined that for an interim period, Discount will be able to hold the credit card company as AL, until a final decision on the matter, which, as stated, will have to be received by the end of this coming January.
The team that examined the issue notes in the work that the original exclusion of Discount from the law was done, among other things, so that it would be a factor generating competition: “From the committee’s analysis it appears that Discount was not a factor generating competition in the banking system.” They also point out that Kaal behaved in a competitive manner, mainly towards its competitors in the credit card industry: “Kaal operates aggressively in the markets where it competes against the separate credit card companies only. In the other markets in which it operates, vis-a-vis the banking system in general and Discount in particular, it does not work effectively to increase Competition and the reduction of centralization in the economy”.
Although the separation of the credit card companies from the major banks did not result in lower prices for consumers, the implementation committee claims that the separation increased competition and reduced centralization in the banking system. Therefore, the committee recommends the Minister of Finance to advance the process of separation under the reasoning: “In light of the results of the separations that have already been carried out, and the position that increasing the number of players in the market is likely to affect competition in the banking market, including in the consumer credit market, the committee intends to recommend to the Minister of Finance to use this authority (to order the separation as Al-A.A)”.