Big Banks Retreat in Challenge Over Control of Masav

Israel’s five largest banks, Bank Leumi, Bank Hapoalim, Mizrahi-Tefahot, Discount Bank and the International Bank, have withdrawn their appeal to the Supreme Court against the Competition Authority over their control of Masav, the bank-clearing company that runs the country’s payment-transfer infrastructure. The move weakens their grip on a system through which most money transfers in Israel are processed.

The banks had asked for a temporary permit to continue jointly holding and operating Masav after Competition Authority head Michal Cohen refused last year to extend their exemption from antitrust restrictions. Following the withdrawal, Masav will now be subject to stricter conditions until a final decision is made on the banks’ ownership.

Under the interim terms, the banks will have to replace board representatives with two directors chosen by Masav itself. The new arrangement is also expected to increase the influence of fintech companies, smaller banks and credit-card companies in how Masav is run. The conditions are set to take effect at the beginning of August.

The banks had already been rejected in April by the Competition Tribunal, which accepted Cohen’s recommendation. They appealed that ruling, but withdrew it on Thursday after hearing comments from the Supreme Court on the temporary terms for their continued joint holding.

Masav, headed by Ofir Kadush, is the only payments system in Israel that enables transfers between bank accounts. The banks hold 75% of its shares, and the authority fears that such control could let them block competitors, including fintech firms. The article also notes that Bit, Bank Hapoalim’s transfer app, and PayBox, Discount Bank’s app, are expected to connect to Masav for transfers between the apps, starting with Bit to PayBox, subject to regulatory instructions.