US embassy cable - 05TELAVIV4729

C O N F I D E N T I A L TEL AVIV 004729 
 
SIPDIS 
 
E.O. 12958: DECL: 07/29/2015 
TAGS: ECON, EFIN, IS, ECONOMY AND FINANCE, GOI INTERNAL 
SUBJECT: KNESSET ADOPTS BACHAR CAPITAL MARKET REFORMS 
 
REF: A. A) 04 TEL AVIV 6626 
     B. B) 04 TEL AVIV 5594 
 
Classified By: Economic Counselor William Weinstein for Reasons 1.4 (b) 
 and (d) 
 
1. (SBU) Summary. The Bachar capital market reforms won 
Knesset approval on Monday, July 25 by of vote of 62-1-1 (in 
favor, opposed, abstention).  The Bachar reforms force banks 
to sell off their Kupot Gemel (provident funds) and mutual 
funds.  However, lobbying by the banking industry succeeded 
in making some changes to the final reform package.  The 
changes allow smaller banks more time to divest from the 
provident and mutual funds market. End Summary. 
 
2. (SBU) The main provisions of the Bachar reforms as 
approved by the Knesset include: 
-Bank Leumi and Bank Hapoalim have three years to sell their 
Kupot Gemel (provident funds).  Other banks have six years to 
complete the sale. 
-Bank Leumi and Bank Hapoalim have four years to sell their 
mutual funds, other banks can take up to eight years to 
complete the transaction. 
-Bank Leumi and Bank Hapoalim may enter the life insurance 
market five years after they sell their holdings in the Kupot 
Gemel and mutual funds.  Other banks can enter the market 
after they sell their funds, but not before 2010. 
-Banks can sell other types of insurance, including pension 
insurance, after they sell their Kupot Gemel and mutual funds. 
 
According to data provided by Director General of the 
Ministry of Finance, Yossi Bachar, after whom the reforms are 
named, the two largest banks in Israel, Bank Hapoalim and 
Bank Leumi, dominate the market for provident and mutual 
funds. 
 
3. (SBU) In a press conference held the day after passage of 
the reforms, Minister of Finance Binyamian Netanyahu noted 
that the changes are part of Israel's transformation into an 
open market economy.  He commented that citizens will now be 
able to buy various products in the capital markets just like 
they can in a supermarket -- in a clear and transparent 
manner where all the goods are laid out on the shelves in 
front of them with a price tag on each item. 
 
4. (C) On July 28, Bachar told Econ Counselor that he was 
pleased with the passage of the reforms, but that there were 
outstanding issues regarding implementation of the program. 
Post will follow-up and report on Ministry of Finance's plans 
for implementing the reforms. 
 
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KURTZER