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Tightening Bank Controls Tops Next Israeli Government To-Do List
Mar 15, 2015 | Bloomberg
By David Wainer and Shoshanna Solomon
Banks probably will be next on the list of companies facing increasingly tough Israeli government regulation as politicians seek to trim the cost of living and boost competition. -
Leumi Receives Green Light to Establish Independent Commission
Mar 14, 2015 | News1
By Itamar Levin
Tel Aviv District Court Judge Khaled Kabub approved Bank Leumi’s request to a establish an independent claims commission to examine the US tax evasion affair, and therefore approved a four month freeze on settling the claims against the bank. -
How Did The Leumi Affair Affect the Israeli Public?
Mar 13, 2015 | Forbes Israel
By Hadar Horesh
We don’t really know what happening in the delicate and flammable relationship between the big banks.
Bank Leumi Media Monitoring 3/16/15
English Language Press
Swiss German Language Press - There are no relevant clips to report at this time.
Israeli Press
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Tightening Bank Controls Tops Next Israeli Government To-Do List
Mar 15, 2015 | Bloomberg
By David Wainer and Shoshanna Solomon
Banks probably will be next on the list of companies facing increasingly tough Israeli government regulation as politicians seek to trim the cost of living and boost competition.
Regardless of who wins the March 17 election, investors are bracing for the next administration to introduce more regulation in the private sector. Moshe Kahlon, the leader of the new Kulanu party who wants to become the next finance minister, said in a Feb. 5 Army Radio interview that he “will sit in any government that allows us to beat the banks.” Some bank fees were eliminated or reduced last month by the central bank.
“One of the new government’s main priorities will be to tackle the high cost of living,” Eldad Tamir, chief executive officer of Tel Aviv-based Tamir Fishman Group, a financial services company with more than $3 billion in assets under management, said by phone on March 8. “We’re definitely keeping our exposure to banks underweight at the moment.”
Israel Chemicals Ltd., a manufacturer of fertilizers and other mineral-based products that harvests chemicals from the Dead Sea, and Shufersal Ltd., which runs a chain of supermarket stores, were among the worst performers in the TA-100 stock index under Prime Minister Benjamin Netanyahu’s government as politicians sought to raise taxes on natural resources and spur competition in the food sector.
Increased regulation in the telecommunications and gas markets has wiped billions of shekels from the shares of listed companies in those sectors. Since February, the central bank has eliminated fees paid by account-holders for bounced checks and some charges for managing mortgages, credit card payments and issuing debit cards.Cutting Costs
While Netanyahu’s Likud faction and the rival Zionist Union are split by approaches to the peace process, there is little disagreement about the need to increase competition in Israel’s economy. Even if Kahlon doesn’t become the next finance minister, he is almost certain to end up in the next government and be an influential voice, Steven Shein, a Tel Aviv-based trader at Psagot Investment House, said on Feb. 3.
Netanyahu told Israel Radio on Sunday he’d appoint Kahlon as Finance Minister, an offer Kahlon dismissed as “spin.” The last polls before the election show Netanyahu’s Likud party trailing Isaac Herzog’s Zionist Union party.
Kahlon, who has sought to distinguish himself as an economy-focused politician after driving down mobile phone costs by 90 percent as communications minister, has said that dealing with high housing prices and banking should be a priority. Kahlon said on March 10 he’d help new banks enter the market. In an economic plan released by his Kulanu party on Feb. 3, Kahlon proposed separating credit card companies from banks. Shares of Israel’s two largest lenders, Bank Hapoalim Ltd. and Bank Leumi Le-Israel Ltd., dropped as much as 2.1 percent and 1.9 percent respectively that day.Reform Focus
“On the economic front there will be more emphasis on reforms, on lowering the costs for consumers,” Yair Shani, chief investment officer at IBI Mutual Funds, which manages 15 billion shekels ($3.7 billion), said by phone on March 8. “While many sectors have been targeted, one of the most prominent ones has been the banking industry.”
Hapoalim and Leumi control more than 50 percent of market share, according to the central bank. Since the “banking system is relatively concentrated,” and the main provider of financial services to households and small businesses, there is concern that there isn’t enough competition, David Zaken, the supervisor of banks, wrote in a 2013 report.
To be sure, Israeli bank valuations are attractive relative to global peers, and Idan Azoulay, chief investment manager at Tel Aviv-based Epsilon Investment House Ltd., says it’s not time to sell. Hapoalim and Leumi both have a price-to-book ratio, a measure of market price versus equity, of about 0.7. That compares with MSCI Europe Banks Index of about 1, according to data compiled by Bloomberg.Cheap Companies
“Banks are trading at very low valuations, so it could be the market is preparing itself for this,” Azoulay said by phone on March 8. “I don’t think that their shares will be hit so much after elections if there will be a very militant finance minister.”
A lack of populist ire toward banks and barriers to entry like capital requirements will shield lenders from the kind of competition that has eroded profits in the telecom sector, Citigroup Inc. analyst Michael Klahr wrote in a note to clients last week.
Efrat Peled, the chief executive officer of Arison Investments, which holds a controlling stake in Hapoalim, said in a March 12 interview that she still thinks Israel’s banking sector “is an interesting sector to grow in.”Falling Margins
Still, lenders are already struggling with tightening margins. The Bank of Israel has cut interest rates 13 times since 2011 to a record low to boost an economy that last year grew at the slowest pace since 2009.
A widening tax-evasion probe in the U.S. has also ensnared the country’s largest banks, including Leumi, Hapoalim and Mizrahi Tehafot Bank Ltd. Hapoalim and Mizrahi said on March 10 they had set aside a combined 291 million shekels to cover the potential costs. The provisions come after Leumi agreed to pay $400 million in December for helping American clients evade taxes.
IBI’s Shani said that while he’s not rushing to sell bank shares before the elections, he is accumulating investments in Israeli companies that operate abroad and are insulated from government intervention.
“While there won’t be any short-term solutions, the next government will emphasize reforms that lower the cost for consumers,” Shani said. “I prefer that my portfolio be focused on companies that aren’t under regulator scrutiny.”
For additional coverage (Hebrew):
http://www.themarker.com/markets/1.2589979
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Leumi Receives Green Light to Establish Independent Commission
Mar 14, 2015 | News1
By Itamar Levin
Tel Aviv District Court Judge Khaled Kabub approved Bank Leumi’s request to a establish an independent claims commission to examine the US tax evasion affair, and therefore approved a four month freeze on settling the claims against the bank.
Kabub explained that there is a viable explanation as to why the bank decided to establish the commission only after the two derivative claims were filed. Until recently the bank did not know how the proceedings against it would end. He noted that the establishment of the commission did not require approval from the court and that its recommendations are not binding on the court. The judicial review will based on the board of directors decisions following the recommendations of the commission.
According to Kabub the establishment of the commission demonstrates Leumi’s intention to perform a thorough, comprehensive and independent examination by a commission of independent professionals. He notes that the obligations of the bank to the commission. The commission can carry out an inspection on any employee at any time and examine any document and hire independent experts. Kabub further notes that that those seeking the derivative action did not object to the request, and that the board has committed to publishing the recommendations. Finally he said he wanted to give Leumi a reasonable period of time, four months to allow the commission to work.
- The bank announced the commission will be headed by retired president of the Tel Aviv district court, Uri Goren, and will be asked to recommend whether to sue officers past and present for damages incurred as a result of the affair in the US
- The banks request for the commission was is an attempt to take the sting out of the two derivative claims.
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How Did The Leumi Affair Affect the Israeli Public?
Mar 13, 2015 | Forbes Israel
By Hadar Horesh
We don’t really know what happening in the delicate and flammable relationship between the big banks.
In Israel with the US tax authorities. Leumi published details about the settlement it signed with the authorities, after it was suspected of assisting US citizens with laundering money and hiding it from the authorities. Hapoalim and Mizrahi Tefahot are still being examined by the authorities. Just recently the banks were forced to report the huge provisions they were forced to set aside against any potential damages. However, in the meantime there are consequences in the field, for example the services of the banks to their customers in Israel.
Recently one the employees of Bank Leumi refused to open account for one of my acquaintances on the suspicion that he was an American citizen. My friend has never been a US citizen, but a touch of an Anglo-Saxon accent in his speech caused the clerk to become suspicious that he holds a US passport. Instead of opening the account he closed the bank’s doors to him. Hapoalim obviously permits us citizens to join their clientele, but they can only open accounts in branches specializing in identity testing and that know how to fill out the required forms.
Leumi and Hapoalim (Hapoalim is acting according to similar control instructions from the authorities in the US) refused to provide the list of restrictions that apply to their customers in Israel after the affair in the US. The spokesperson of Bank Hapoalim said “according to the bank law there are strict instructions on opening bank accounts for foreign customers, and the bank is acting as required”. Leumi stated “in light of the changing regulation in the world, which has implication for the entire banking system in Israel, there has been a change in the way foreign securities accounts are managed as well as the accounts of foreign residents. Policy compliance and strict controls ensure that the group operates in accordance with current regulatory requirements”.
Banking 2.0
- Working at banks isn’t what it used to be, Leumi employees recently had to give up their automatic wage increase, As well as those of Bank Discount. Bank Hapoalim announced a voluntary retirement program of 700 employees
- The two largest banks announced digital banking plans, under separate brands, parallel to their efficiency programs.
- No deadlines have been announces as they depend on approval by the Bank of Israel, which turns out is not entirely enthusiastic about the process. The Bank of Israel stated that there needs to be a separation in distinguishing the entry of new players that will contribute to a reduction in concentration and the activities of already existing banks.
- In other words the establishment of a "digital bank" by the big banks will only perpetuate the control of the two largest banks in the banking system, and block the chances of future competition. Moreover, the big banks will use their means, and their ability to obtain better technology, to further push back the small banks operating in the industry, and thus also tighten their grip on the market.
- The article discusses the possible economic plans of those that will potentially be determining it, under the new government.
For additional coverage on Bank Leumi's plan for a digital Bank (Hebrew)
http://www.themarker.com/markets/1.2589219 (translation available on request)
Bank Leumi Media Monitoring 3/16/15
English Language Press
Swiss German Language Press - There are no relevant clips to report at this time.
Israeli Press
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