The cabinet approved a draft law on economic concentration Sunday, paving the way for restrictions on simultaneous ownership of large financial and non-financial corporations.
Seven ministers voted in favor of adopting the government- appointed concentration committee’s final report, while three opposed the measure and two abstained.
Finance Minister Yuval Steinitz praised the “historic reform,” saying that the ministers displayed a combination of intellectual courage and caution in reaching their decision.
Previously, Deputy Attorney- General Avi Licht gave the report a green light, saying that its proposed measures served the public interest and would improve the market structure in the long-term. He added that the measures should stand up to judicial scrutiny if tested in court.
The Committee on Strengthening Market Competitiveness, as it is officially known, submitted its final report in February, recommending the enforced separation of financial and nonfinancial holdings by prohibiting control of financial institutions by large nonfinancial corporations. It defined a large financial corporation as one with at least NIS 40 billion in assets under management, and a large non-financial corporation as one with at least NIS 6 billion in Israeli sales.
It also recommended that new companies limit pyramid structures to a maximum of two public levels, but that existing companies be permitted to maintain pyramids of up to three public levels.
Corporations will have six years to comply with the new regulations if and when they are implemented – not four years as the report proposed.
A wide range of public figures criticized the report following its release, many of them insisting that it did not go far enough. One of these people, former Bank of Israel governor David Klein, said it should have proposed the separation of all financial and non-financial holdings, for the reason that those who give credit should not simultaneously be those who receive it.
Israel Securities Authority chairman Shmuel Hauser – who served on the 10-person committee headed by former Treasury director-general Haim Shani – warned the report did not provide any long-term solutions, and said its success depended not only on legislators and regulators but also on the market itself.
Opposition leader Shelly Yechimovich said the measures would not reduce concentration, and accused the government of squandering an entire term in which they had the opportunity to separate financial and non-financial holdings, deal with pyramids and stop crossover transactions.