KNESSET ADOPTS BACHAR CAPITAL MARKET REFORMS

C O N F I D E N T I A L TEL AVIV 004729 SIPDIS E.O. 12958: DECL: 07/29/2015 TAGS: ECON EFIN IS ECONOMY AND FINANCE GOI INTERNAL SUBJECT: KNESSET ADOPTS BACHAR CAPITAL MARKET REFORMS REF: A. A) 04 TEL AVIV 6626 ¶B. B) 04 TEL AVIV 5594 Classified By: Economic Counselor William Weinstein for Reasons 1.4 (b) and (d) ¶1. (SBU) Summary. The Bachar capital market reforms won Knesset approval on Monday, July 25 by of vote of 62-1-1 (in favor, opposed, abstention). The Bachar reforms force banks to sell off their Kupot Gemel (provident funds) and mutual funds. However, lobbying by the banking industry succeeded in making some changes to the final reform package. The changes allow smaller banks more time to divest from the provident and mutual funds market. End Summary. ¶2. (SBU) The main provisions of the Bachar reforms as approved by the Knesset include: -Bank Leumi and Bank Hapoalim have three years to sell their Kupot Gemel (provident funds). Other banks have six years to complete the sale. -Bank Leumi and Bank Hapoalim have four years to sell their mutual funds, other banks can take up to eight years to complete the transaction. -Bank Leumi and Bank Hapoalim may enter the life insurance market five years after they sell their holdings in the Kupot Gemel and mutual funds. Other banks can enter the market after they sell their funds, but not before 2010. -Banks can sell other types of insurance, including pension insurance, after they sell their Kupot Gemel and mutual funds. According to data provided by Director General of the Ministry of Finance, Yossi Bachar, after whom the reforms are named, the two largest banks in Israel, Bank Hapoalim and Bank Leumi, dominate the market for provident and mutual funds. ¶3. (SBU) In a press conference held the day after passage of the reforms, Minister of Finance Binyamian Netanyahu noted that the changes are part of Israel's transformation into an open market economy. He commented that citizens will now be able to buy various products in the capital markets just like they can in a supermarket -- in a clear and transparent manner where all the goods are laid out on the shelves in front of them with a price tag on each item. ¶4. (C) On July 28, Bachar told Econ Counselor that he was pleased with the passage of the reforms, but that there were outstanding issues regarding implementation of the program. Post will follow-up and report on Ministry of Finance's plans for implementing the reforms. ********************************************* ******************** Visit Embassy Tel Aviv's Classified Website: http://www.state.sgov.gov/p/nea/telaviv You can also access this site through the State Department's Classified SIPRNET website. ********************************************* ******************** KURTZER