Bank of Israel 370.
(photo credit: Wikimedia Commons)
The Committee on Strengthening Market Competitiveness’s final report did not go
far enough when it recommended only separating large financial and non-financial
holdings, former Bank of Israel Governor David Klein told business leaders over
“There is a need to separate financial and non-financial
holdings for the simple reason that those who give credit cannot at the same
time be those who receive credit,” Klein said at a meeting of the Tel Aviv &
Central Israel Chamber of Commerce presidium.
The report, which was
released in February, but is still awaiting approval by the government, proposed
enforcing separation of large financial and non-financial holdings by
prohibiting control of financial institutions by large non-financial
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 6b. in Israeli sales (or NIS 7.5 billion
for existing corporations).
Klein, who served as central bank governor
from 2000-05 and is now a member of the Federation of Israeli Chambers of
Commerce, said the need to enforce separation of financial and non-financial
holdings reminded him of the privatization of the old pension funds system of a
“These funds were not privatized in order to lower management
fees, but rather because they held the state by the throat, and from time to
time took actions that put the state on the verge of bankruptcy. At a certain
stage it became impossible to continue this situation. In my opinion, separation
of control of financial corporations expanded greatly after this measure was
taken,” he said.
The great fear now, Klein added, is over who will
purchase the insurance companies and financial institutions which are put on the
market following the report’s implementation.
But he urged his audience
not to worry excessively, saying: “The financial corporations will find other
buyers, and of course they could also be controlled by the public.”