JERUSALEM, April 22 (Reuters) - Israel’s banking regulator plans to relax rules for credit card companies as part of a broader reform aimed at boosting competition in the banking sector and lowering the cost of credit.
In late 2016, the government enacted a law requiring Hapoalim and Leumi — the country’s two largest banks which together control more than 50 percent of banking activity — to divest their credit card companies within three years, while also making it easier for new banks to enter the market.
In a draft of amendments to its directives, the Bank of Israel said on Sunday new credit card companies will be allowed a lower liquidity requirement — a Tier I equity ratio of at least 8 percent versus 9 percent for banks, and an overall capital ratio of 11.5 percent compared with 12.5 percent.
The central bank believes this will reduce the companies’ liquidity needs by “a few billion shekels.”
It also will allow grant further leniency to credit card firms in liquidity risk management requirements while ensuring lines of financing from banks.
“We intend to encourage the separated companies so that they can become independent companies with a sustainable business model, the capacity to compete in means of payment and in the credit field, provide value to households and small businesses, and later to enter other financial fields,” said Supervisor of Banks Hedva Ber.
She noted that the directives will make it easier for the separated companies, mainly in the field of financing needs and costs.
Reporting by Steven Scheer Editing by Keith Weir