Discount Bank petitions High Court over separation of Visa Cal

Bank Discount petitioned the High Court against the recommendations of the Regulators Committee that they be forced out as the majority owner of Visa Cal.

The logo of Israel Discount Bank is reflected in mirrors outside their branch in Tel Aviv, Israel July 27, 2016 (photo credit: BAZ RATNER/REUTERS)
The logo of Israel Discount Bank is reflected in mirrors outside their branch in Tel Aviv, Israel July 27, 2016
(photo credit: BAZ RATNER/REUTERS)

Bank Discount petitioned the High Court earlier this month against the Regulators Committee’s recommendation to separate the credit card company Visa Cal from the bank. 

Discount demanded to receive all the documents and testimonies concerning the process by which the recommendation was received from the committee.

The bank was surprised to discover that some of the data provided as part of the committee's recommendations had been blacked out so that it wasn’t possible to deal with the committee's recommendations as a matter of fact. The court didn’t reject the bank's claims outright, but determined that they could be addressed on the merits of the matter after the hearing that the committee would hold for the bank's representatives.

The committee held the hearing on November 29, during which representatives of the bank, led by CEO Uri Levin, joined along. Levin asserted that the separation of other credit cards from banks hadn’t improved competition which implied that the separation of Visa Cal from Discount wouldn’t improve competition.

Discount's holding of Cal actually encouraged the bank to embark on various consumer initiatives, the bank claimed, the last of which was the increase in interest on current deposits, which subsequently dragged down the entire banking system. Also, Cal avoided raising the interest rate on credit card transactions on Discount’s order.

A Visa credit card is seen on a computer keyboard in this picture illustration (credit: REUTERS/PHILIPPE WOJAZER)A Visa credit card is seen on a computer keyboard in this picture illustration (credit: REUTERS/PHILIPPE WOJAZER)

What happens after the hearing?

After the hearing, the committee must receive its final recommendations which will be transferred to the next finance minister. The Governor of the Bank of Israel is also supposed to make a decision on the matter, even though his representative is a member of the Regulations Committee.

According to estimates, it will be a big surprise if the committee decides to reverse its initial recommendations and allow Discount to continue to control Visa Cal. Either way, it’s not yet become clear how Visa Cal will be sold if it’s decided that the bank will be forced to sell Cal.