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Israel Discount Bank ordered to divest credit card business

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JERUSALEM — Israel Discount Bank will have to sell its credit card business CAL under draft rules aimed at boosting competition in the country’s banking and credit sectors.

Israel’s Finance Minister Bezalel Smotrich said he was changing regulations to force Israel Discount Bank to sell the business and create a new player in the overly-concentrated credit market for the benefit of households and small businesses.

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“This step, combined with additional steps that we will bring soon, will lead to a competitive credit market and contribute to economic growth,” Smotrich said.

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He said Bank of Israel Governor Amir Yaron had approved the draft regulations, which need parliamentary finance committee approval.

A committee, which included representatives from the Bank of Israel, regulators and the finance ministry, had recommended changing the legal definition of what constitutes a bank, a move that would require Discount to sell CAL.

Discount, Israel’s fourth-largest bank, has opposed the decision.

“The decision to separate CAL from Discount … is wrong, and certainly will not increase competition in the banking system,” it said in response.

“However, Discount will continue to generate significant value for its shareholders even in the face of this decision.”

In 2015, the central bank forced Leumi and Hapoalim, Israel’s two largest banks which dominate the credit supply market, to sell their credit card companies to create competition.

Smotrich also said he intended to examine the issue of the control of “large institutional bodies” in debit card companies. (Reporting by Steven Scheer. Editing by Jane Merriman)

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