Ex-BoI chief: Concentration committee did not go far enough

Former Bank of Israel Governor David Klein says Committee on Strengthening Market Competitiveness’s final report did not go far enough.

By NADAV SHEMER
April 9, 2012 01:55
1 minute read.
Bank of Israel

Bank of Israel 370. (photo credit: Wikimedia Commons)

 
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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 the weekend.

“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.

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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 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 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 decade ago.

“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.”

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