A legislative memorandum was published by the Strum Committee and approved on Sunday by the cabinet, but changes have already been made in the memorandum submitted, sources inform "Globes."
One of the changes is in the period during which restrictions in issuing credit cards will apply to the banks. Under the revised memorandum, the restrictions will apply from the date on which the law goes into effect until three years after the sale of a controlling interest in the credit card company, instead of five years, as in the original memorandum. The memorandum also bars the major banks from offering a credit card to their customers, except for a 45-day period before the customers' current credit card expires.
Compulsory measures have not ended
The change in the length of the restriction period was designed to give Bank Hapoalim (TASE: POLI) and Bank Leumi (TASE: LUMI) an incentive to sell their credit card companies as quickly as possible, while on the other hand giving the separated credit card companies protection against competition from the banks for a reasonable three-year period.
Under the current version of the bill, the banks are given three years to sell their credit card companies. If they prefer to wait for three years to sell, the restrictions on issuing credit cards will apply for six years (the previous legislative memorandum stated five years). On the other hand, if the banks sell their credit card companies within a year of the law going into effect, the restriction on issuing credit cards will apply for only four years.
Another change in the memorandum concerns the market share restriction on the banks' credit card companies. It appears that the Ministry of Finance and the Bank of Israel have changed their minds again, and have gone back to the original restriction - a 40% ceiling on the market share of the credit card companies among the banks' customers.
The 40% restriction appeared in the draft memorandum, but it was later decided to reduce the restriction, and the restriction in the legislative memorandum published at the end of last week was 52%. The increase in the ceiling meant that each bank could work with only two credit card companies. The Ministry of Finance did not like the change, however, and decided to return to the more restrictive original 40% ceiling. This is particularly good news for ICC-Cal, whose credit cards the two largest banks will be obligated to issue.
Had the previous version been accepted, the banks could have blocked the company, and could have worked with only Isracard and Leumi Card. It is believed that the recent changes introduced are probably not the last word, particularly concerning the market share restriction, and the struggle between the Ministry of Finance and the Bank of Israel over the terms of the law will continue.
Published by Globes [online], Israel business news - www.globes-online.com - on August 2, 2016
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