The Bank of Israel has instructed Bank Hapoalim and Bank Leumi to make changes to the composition of the boards of directors of the two credit card companies that will be separated from them—Isracard and Leumicard—against the background of the legislation being formulated, in order to increase competition and reduce concentration in the banking market.

The Bank of Israel will act throughout and following the separation process so that the credit card companies that will be separated from the banks will be a significant competitive factor. The transition period until the separation creates a potential for built-in conflicts of interest between the banks and the credit card companies, which may place the directors of the credit card companies who also serve as senior officers of the parent companies in a problematic situation. The objective of the guidelines regarding the changes to be made in the composition of the board of directors is to reduce this potential.

As such, the banks must take the following steps by March 31, 2017:

• The Chairman of the Board of Directors of the credit card company shall not be an officer or employee of the bank.

• The Directors of the credit card company on behalf of the bank shall not be members of the bank’s management or officers of the bank.

• The Directors on behalf of the bank shall not be involved in determining the strategy or managing the business activity of the bank.

• The composition of the credit card company’s Board of Directors shall be such that the directors on behalf of the bank do not comprise a majority.

(YWN – Israel Desk, Jerusalem)