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18.04.2012
 
The Supervisor of Banks and Commissioner of Capital Markets, Insurance, and Savings Published a Draft Document of Principles for Control of Supervised Entities
JOINT RELEASE
 
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Supervisor of Banks David Zaken and Commissioner of Capital Markets, Insurance, and Savings Prof. Oded Sarig formulated a joint document of principles for granting a permit for control and holding the means of control in supervised entities and establishing terms of the permit. The documents is intended to increase coordination and uniformity in the regulatory policy practiced when granting control permits for various financial institutions – banks, insurance and long terms savings institutions. The document is currently being published in a draft version for comment by the public.
In December 2010, the Commissioner of Capital Markets, Insurance, and Savings, the Supervisor of Banks, and the Chairman of the Israel Securities Authority, together with the Ministry of Justice, published a joint document which listed the criteria for credibility of an executive, holder of means of control, and controlling party of a supervised entity. Now, the supervisors have formulated guiding principles for granting permits for control and holding the means of control in supervised entities. The regulators' considerations in examining the suitability of an applicant for control of a supervised entity are based in five primary areas: personal and professional integrity; financial strength; investment strategy; business experience; and the other business activities and enterprises of the applicant for the permit. With that, each regulator has independent discretion in setting criteria and terms for granting the permit.
In light of the joint document of principles, the specific policy documents which guide each regulator in granting control permits in the sector under their supervision were also updated. These documents, which detail the criteria and general terms for those requesting permits, are also published in draft version for comment by the public.
The guiding principles for granting a permit for control and holding the means of control, which were set in the joint document of principles, deal with several principal issues:
1. Establishing the minimum holding of the supervised entity's capital required for control, which is directly related to the size of the supervised entity.
2. Limiting the gap between the equity interest of the controlling party in the supervised entity and the controlling party's share of control in the entity.
3. Establishing general rules and limitations regarding entities through which a controlling party is permitted to own a share of a supervised entity, with the goal of ensuring the stability of the chain of control.
4. An equity requirement of the entity requesting the control permit, directly related to the size of the investment in the supervised entity.
5. Limitations on the method of financing the acquisition of means of control in the supervised entity.
6. Limitations on the other holdings and activities of the controller of a supervised entity, in order to prevent conflicts of interest.
7. A requirement for commitment by the members of the control group to inject capital into the supervised entity which they control, at terms and amount that the relevant regulator will establish.
Commissioner of Capital Markets, Insurance, and Savings Prof. Oded Sarig noted, "The joint principles reflect the importance we attach to the identity of those controlling institutions which manage money for others. The principles were formulated after joint examination of the current situation and with establishing appropriate goals for the future".
Supervisor of Banks David Zaken added, "The formulation of the joint document of principles was carried out as part of the continuing coordination and collaboration procedures between the Banking Supervision Department and the Ministry of Finance Capital Markets, Insurance, and Savings Department". Zaken added, "In the banking system there is also a structure of decentralized ownership without a controlling core, and the infrastructure for its proper management was recently strengthened through amendments to the Banking Law".
Comments by the public are welcome through May 20, 2012.