Hapoalim, Treasury agree on pension advisory plan

As stipulated by the Bachar capital market reforms, all banks were forced to sell their holdings in provident and mutual funds in return for permission to begin selling advice on pension savings.

After months of negotiations with the Finance Ministry, Bank Hapoalim won the right to start selling pension advice to a limited number of customers immediately following the sale of its asset-management businesses, the Treasury and bank said Sunday. Following Hapoalim's completion of its asset-management businesses, a process that is expected to take several more months according to a bank spokeswoman, the country's largest bank will be able to sell pension advice to independent business-owners, unemployed citizens above 55 and children aged 18 and younger. As stipulated by the Bachar capital market reforms, all banks were forced to sell their holdings in provident and mutual funds in return for permission to begin selling advice on pension savings. Despite expectations that it will conclude the sale of its asset-management businesses by the end of the year, the bank will only be able to provide pension consulting services to Israel's approximately 2.4 million salaried employees after August 1, 2010, the ministry and Hapoalim said in separate statements. In exchange for Hapoalim agreeing to wait until 2010 to enter the pension market, Yadin Antebi, the Finance Ministry's commissioner for capital markets, insurance and savings, agreed to sponsor legislation this year allowing all banks to sell life insurance policies, possibly as early as January 1, 2008, the ministry said. "This development will allow us to begin offering pension advice much sooner than the 2012 date proposed by MK Gilad Erdan (chairman of the Knesset Economics Action committee)," Hapoalim said. "We will now be able to minimize the damage caused to our customers and can provide them with the proper advice on how to manage their retirement money." Meanwhile, the Finance Ministry said the deal would help the smaller banks establish their pension-advisory services before Hapaolim can enter the market. "Without any restriction on the biggest banks' immediate entry, we were concerned that the pension market would be uncompetitive," the Ministry said. "In the plan we've now agreed on, Hapoalim will be restricted in offering pensions to wage earners." Under the agreement, the bank also agreed to sell its 51 percent stake in Bank Massad Ltd. by the end of the year. The lender, with assets of NIS 3 billion, is the last banking unit controlled by Hapoalim after it sold Bank Otsar Hahayal Ltd. and Bank Yahav Ltd. "This is good news for the bank," said Alon Glazer, an analyst at Leader Capital Markets. "We don't expect Hapoalim to lose customers in the next three years and once 2010 comes, the pension-consultancy sector will bring in large revenues." Meanwhile, the country's second largest bank, Leumi, has not signed a similar deal with the Finance Ministry and said in its official response that it is proceeding with a request for a pension advisory license, something the bank said it expects to be granted within the next few of weeks. "The bank believes that any further delay in being granted the license will hurt our customers and we intend to do everything in our power to serve our customers in the best way possible," said Leumi, which last week filed a request for a pension advisory license after completing the sale of all of its asset-management businesses. In January, Antebi put a hold on Hapoalim and Leumi's entrance into the pension sector to allow the medium and smaller banks to establish themselves in the market before the big banks were unleashed. Earlier this year, the Bank of Israel said it supports the entrance of the country's two largest banks into the pension consultancy field after studying the Finance Ministry's proposal to delay their entrance into this sector and after holding discussions with representatives of small and medium-sized banks. The Bank of Israel noted that there is serious concern about the preparedness of the small and mid-sized banks to offer pension advice to a large number of employees, especially in the outlying areas of the country. Additionally, the Central Bank doubts whether the postponement of the "big banks" entrance into the field of pension advice will lead to a reduction in their dominance or an increase in competition in the banking system, as Hapoalim and Leumi will develop alternative products to offer their customers and when they finally do enter the pension market, many of their old customers will return. Bloomberg contributed to this report