April 4, 2012–Competition in Israel’s financial industry is another area where reform has lacked teeth. The committee tasked with addressing concentration of power within the Israeli economy had recommended banning companies from owning both financial and non-financial businesses. It had also called for “flattening” out pyramid control structures, so that one person at the top would not be controlling subsidiaries of subsidiaries of subsidiaries, etc. But that committee’s proposals were not dramatic enough, and some may be dropped when they reach the Knesset Finance Committee.
The committee’s final recommendations, released last week, could be considered the beginning of the cure. They call for forcing the country’s largest business groups – those owned by Nochi Dankner, Yitzhak Tshuva, the Ofer family and a few others – to choose between their financial and non-financial holdings. This is designed to minimize conflicts of interest, to increase competition by allowing for a more efficient allocation of capital, and to reduce the cost of living over the long term. The recommendation to flatten control pyramids is also expected to increase competition…Read More>>