Bank of Israel, the central bank of the Israel, has asked Bank Hapoalim and Bank Leumi to sell off their credit card businesses.
Hedva Ber, who took over as supervisor of banks at the Bank of Israel less than a week ago, said: "We will work to separate the credit card companies from the banks whose share of the retail credit business is more than 20%.
"That means that the two biggest banks will be required to sell control of their credit card units and will be barred from operating or processing credit cards, though they can continue issuing them."
The move is part of the country’s banking regulator to increase competition in consumer and business credit.
"The initiative will support competition on two levels — by encouraging non-bank lending by the two entities spun off from the banks and by competition within the system because it will strengthen in relative terms mid-sized banks that will continue to control a credit card company," haaretz.com quoted Ber as saying.
"Competition can be promoted without negatively impacting the stability of the banking system," she said.
She did not talk about a timetable for the credit card spinoff and also left open the question of who would control the newly independent credit card issuers.
Ber also revealed that she would allow banks to distribute insurance products and permit institutional investors and non-bank entities to provide finance for retail and small business customers.