Israel's Largest Banks Withdraw Supreme Court Appeal Over Clearing System Control

Israel’s five biggest banks, Leumi, Hapoalim, Mizrahi-Tefahot, Discount and the International, have withdrawn their Supreme Court appeal and accepted tougher conditions imposed by the Competition Authority over their management of Masav, the central bank clearing system. The move followed a recommendation from Supreme Court Justice Ofer Grosskopf and clears the way for a temporary structural change that will take effect on August 1, 2026, sharply reducing the banks’ ability to make unilateral decisions in the system.

Masav is Israel’s main payment infrastructure, used for direct transfers between bank accounts and payment accounts, and for monthly salary, pension and large transaction flows. Founded in 1982, it has since been wholly owned by the five largest banks. Because it is jointly controlled by competing entities in essential infrastructure, Israeli law treats its operation as a restrictive arrangement that requires Competition Authority approval.

The dispute stems from the payments-services reform, under which nonbank providers and fintech companies are supposed to connect directly to Masav so they can offer cheaper competing payment services. Competition Commissioner Michal Cohen said last year that the banks’ exclusive control creates an inherent conflict of interest because they control the main infrastructure their new rivals need. She warned that this could delay access, hurt innovation and push competitors out of the market. In April, the Competition Tribunal accepted that view and rejected the banks’ arguments, saying the current structure does not serve the public interest.

The banks initially appealed to the Supreme Court, but have now withdrawn it after the judges’ comments. The temporary terms are intended to weaken their hold over the company while the final ownership issue is still being examined by the Competition Tribunal. Starting in August, two of the five bank representatives on Masav’s board will lose their seats and be replaced by two representatives chosen by other system participants, including fintech firms, smaller banks and credit card companies. Together with a voting-rule change that already took effect in May, the new setup will prevent the large banks from forcing unilateral decisions.

Last month, the Competition Authority took another major step against the same five banks by designating them a “group of concentration” in retail banking services, an unusual move in Israel’s financial sector. Despite Bank of Israel opposition, the designation gives Cohen direct power to impose restrictions, especially on deposit interest oversight and preventing price discrimination between customers. The banks have not yet issued a formal response, but are expected to appeal that decision as well.