Israeli Securities Authority Warns Against Financial Conglomerates
Translated & summarized from Globes by baba
Asaf Singer, Chairman of the Israel Securities Authority, warned against creating large financial conglomerates that combine banks, insurance, and investment firms, stating it would worsen financial concentration. He noted that a few institutions manage over NIS 3 trillion, with five entities controlling nearly 60% of funds. Singer cited risks of conflicts of interest, reduced competition, and consumer harm, advocating instead for strengthening existing competitors and reforming regulatory structures.
The story in 5 lines · by baba
- Israel Securities Authority Chairman Asaf Singer warns against financial conglomerates.
- He argues such mergers would increase financial concentration, not competition.
- Institutional bodies manage over NIS 3 trillion in assets in Israel.
- Five entities manage nearly 60% of funds, posing risks of conflicts of interest.
- Singer advocates strengthening existing competitors and regulatory reform instead.
Asaf Singer, Chairman of the Israel Securities Authority, has issued a warning against the formation of large financial conglomerates that combine banks, insurance companies, and investment firms. He argues that such a move would exacerbate concentration in the financial system rather than foster competition.
Singer stated at an event at Tel Aviv University that replacing banking concentration with institutional concentration is not a solution and merely swaps one problem for another. He noted that investment houses have become major financial players over the past decade, offering a wider range of investment products and making the capital market more accessible through digital and inexpensive trading services.
He highlighted that the growth in savings and managed assets has led to a situation where a few entities wield significant economic power. The volume of assets managed by institutional bodies exceeds NIS 3 trillion, with these bodies holding an average of about 31% of the shares in companies listed on the TA-125 index. Furthermore, nearly 60% of these funds are managed by just five entities.
Singer identified three main risks arising from this concentration of power: conflicts of interest, harm to competition, and detriment to consumers, particularly concerning transparency and the ability to compare products and services. He specifically addressed the "10 Giants" concept, which proposes establishing a few massive financial groups integrating banking, investment, savings, and insurance activities. He believes such conglomerates would create a complex web of conflicts of interest that would be difficult for regulators to monitor.
He also argued that bundling financial services could make it harder for consumers to understand what they are purchasing and whether the price is fair, hindering price comparisons and switching providers, thereby harming competition and the growth of smaller firms. Singer rejected the idea that adding a layer of oversight to holding companies would suffice, suggesting instead a focus on strengthening existing competitors within the banking system, such as investment houses, payment companies, and non-bank credit providers. He also called for a reconsideration of Israel's financial regulatory structure to address overlaps and complexity, while preserving the independence of financial supervisors.
