The Bank of Israel has awarded a conditional banking license to a digital banking venture led by Israeli businessman Nir Zuk, the founder of cybersecurity giant Palo Alto Networks (Nasdaq: PANW).
The new digital bank, which will be called Esh, will offer current accounts to private, business and corporate customers and the self-employed. The bank will provide deposit accounts, loans, payments and credit cards. According to the business plan presented to the Supervisor of Banks, Esh will set up a bank without physical branches based on innovative technology that it is developing itself focusing on the provision of banking services.
The consortium led by Zuk is required by the Bank of Israel to hold at least $50 million in equity. Other members of the founding group include former Israel securities Authority chairman Shmuel Hauser, businessman Yuval Aloni and Kobi Malkin, the former CEO of Bank Massad and Bank Otsar Hahayal who will serve as Esh's CEO.
Bank of Israel Governor Prof. Amir Yaron today gave the representatives of the new digital bank a conditional license to establish a bank and the permits to control it. The Governor also granted a holding permit in the bank to Prof. Shmuel Hauser, who is expected to serve as the new bank's chairman. Receipt of the control permits and the conditional bank license, awarded by the Governor and Supervisor of Banks Yair Avidan will allow the owners to move forward and complete the technical, operational and regulatory preparations required to start the bank's operations. This will include completing the development and testing stages of the new technology, completing the recruitment of the management team and the additional manpower required to establish the bank, and build policies, procedures and processes in its main areas of activity. The establishment period of the bank will last about 18 months and the process will be carried out in consultation with the licensing committee.
The Bank of Israel said that awarding the conditional license and permits was undertaken after a comprehensive and in-depth process carried out by the Supervisor of Banks over the last two years, after examining the business plan submitted. This process included a fit and proper check investigating the honesty, integrity and financial strength of the entrepreneurs, and supporting them in the required regulatory preparation.
The new bank will be overseen by the Bank of Israel's Supervisor of Banks to ensure its stability and to safeguard depositors' money, similar to the supervision of other banks in Israel. The new bank, like any other bank in Israel, will have access to all the liquidity tools of the Bank of Israel (monetary loans and monetary deposits). The new bank will also be able to manage an account at the Bank of Israel and connect to the various payment systems, thus being able to provide all the retail services that banks provide to their customers.
"We will completely change the cost structure"
Businessman Yuval Aloni, one of the founders of the new bank, said, "Esh's first product will be current accounts. However, our long-term plan is to build a variety of products, including competitively priced loans. We built the bank in such a way that completely changes the cost structure, and the money saved will be transparently passed on to customers. I can personally guarantee that there will be no account management fees, we will not request the transfer of the existing account or the salary, and that the following products will also include payments options and issuing international credit cards for households and businesses.
Last year, the bank began raising funds from Israeli institutional bodies and, according to market estimates, they tried to raise funds at a valuation of about NIS 2 billion. Since then there have been falls in global capital markets, inflation has soared and interest rates in Israel and around the world have risen, causing many investors to tighten their belts and tighten the conditions for investments. Despite this, the bank estimates that the full amount will be raised, although probably at a lower amount than was initially planned, but complying with requirements for obtaining a license.
Published by Globes, Israel business news - en.globes.co.il - on December 25, 2022.
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