The Bank of Israel has allowed institutional investors to raise their holding of bank shares to 7.5% from the earlier limit of 5%.
Several institutional investors argued that the earlier limit of 5% prevented them from increasing their bank stakes on behalf of the public, which negatively affected the negotiability of banks’ shares, and indirectly banks’ market values.
The previous limit was also significantly less when compared to majority of other advanced economies where institutions can own 10% to 15% in bank shares.
"In light of all these, the Bank of Israel views it as appropriate to ease the holding limit as noted, the central bank said.
Supervisor of Banks Hedva Ber said: "The leniency that we decided on in the policy regarding granting holding permits will enable the general public to increase its investment in bank shares through the institutions managing its money, and will support increased negotiability of the banks’ shares."
The decision is subject to a permit from the governor of the Bank of Israel.
The move comes only days after the Israeli government unveiled new reforms that would encourage the entry of new banks in the country’s banking industry.
In a bid to boost competition in the sector, the government has asked the country’s two banks-Hapoalim and Leumi- to offload their credit card businesses which would eventually be encouraged to operate as standalone banks.