Banking (Licensing) Law, 5741-1981

In this Law –

"means of control", in a corporation – any of the following:

"credit" – including guarantee, acceptance of bills, discounting of bills, financing by means of asset leasing, opening or confirming letters of credit, and an undertaking to pay money on behalf of another;

"long-term credit" – credit whose terms provide that the average period for repayment of principal is two years or more;

"small bank" – a bank whose asset value did not exceed 5% of the asset value of all banks in Israel, or which exceeded that rate in certain years but not for two consecutive years;

"interested party" – a person who holds more than twenty percent of a particular type of means of control;

"Advisory Committee" – the Advisory Committee appointed under section 6 of the Ordinance;

"holding" or "acquisition" – whether alone or together with others, whether directly or indirectly, including through a controlled corporation;

"together with others" – together with others in permanent cooperation; without prejudice to the generality of the foregoing, the following shall be regarded as permanently cooperating: in the case of an individual – that individual, his or her relative, and a corporation controlled by either of them; in the case of a corporation – that corporation, a person who controls it, and a person controlled by either of them;

"Supervisor" – the Supervisor of Banks appointed under section 5 of the Ordinance;

"Governor" – the Governor of the Bank of Israel appointed under section 6 of the Bank of Israel Law;

"Ordinance" – the Banking Ordinance, 1941;

"underwriting commitment" – as defined in the Securities Law;

"Bank of Israel Law" – Bank of Israel Law, 5770-2010;

"Companies Law" – Companies Law, 5759-1999;

"Pension Advisory and Marketing Law" – Financial Services Supervision Law (Pension Advisory, Marketing and Clearing System), 5765-2005;

"Investment Advisory Regulation Law" – Regulation of Investment Advisory, Investment Marketing and Investment Portfolio Management Law, 5755-1995;

"Securities Law" – Securities Law, 5728-1968;

"Competition and Concentration Reduction Promotion Law" – Law for the Promotion of Competition and Reduction of Concentration, 5774-2013;

"investment advisory" and "investment marketing" – as defined in the Investment Advisory Regulation Law;

"pension advisory" and "pension marketing" – as defined in the Pension Advisory and Marketing Law;

"insurer" and "insurance agent" – as defined in the Financial Services Supervision Law (Insurance), 5741-1981;

"real property" – as defined in the Land Law, 5729-1969, including a right in real property or an undertaking to carry out a transaction in real property;

"portfolio management" – as defined in the Investment Advisory Regulation Law;

"office holder" – as defined in the Companies Law, and any other employee directly subordinate to that office holder;

"branch" – any place where a banking corporation receives monetary deposits or conducts business with its customers, including a mobile branch, but excluding a facility through which a customer may carry out transactions in his or her account with a banking corporation;

"monetary deposits" – including loans;

"provident fund" and "managing company" – as defined in the Financial Services Supervision Law (Provident Funds), 5765-2005;

"relative" – spouse, sibling, parent, descendant, descendant of spouse, and the spouse of each of these;

"joint investment fund in trust" – a fund as defined in the Joint Investments in Trust Law, 5754-1994;

"asset value" – the value of a bank's assets as appearing in the bank's balance sheet in the annual financial report prepared on a consolidated basis in accordance with generally accepted accounting principles applicable to it, and if the bank is controlled by another bank – the asset value in that financial report of the controlling bank;

"control" – the ability – whether alone or together with others – to direct the activity of a corporation, excluding an ability arising solely from fulfilling the role of a director or other office holder in the corporation; without derogating from the generality of the foregoing, a person shall be regarded as controlling a corporation if any of the following applies:

"banking corporation" – a bank, foreign bank or joint services company;

"banking holding corporation" – a corporation in which both of the following apply:

"foreign corporation" – a corporation incorporated in a foreign state;

"auxiliary corporation" – a corporation that is not itself a banking corporation and whose activities are solely within the field of activity permitted to the banking corporation that controls it, excluding activities that have been made exclusive to banking corporations under sections 13 or 21;

"real-sector corporation" – a corporation in which, under the provisions of Chapter III, a banking corporation is prohibited from controlling it or being an interested party in it.

A person authorised to grant a licence, permit or approval under this Law may make it subject to conditions and restrict it, in accordance with the considerations set out in this Law.

A corporation shall not be a banking corporation except under a licence granted pursuant to this Law.

In granting licences under this Law, the following matters shall be taken into account:

The Governor may, after consulting the Licensing Committee, revoke a licence in any of the following cases, after the banking corporation has been given a reasonable opportunity to state its arguments:

however, the Supervisor may, after consulting the Licensing Committee, permit the bank to control the insurance agent alone even if the insurance agent engages in insurance as referred to in sub-paragraph (a) carried out in connection with the granting of housing loans to customers of a banking corporation not referred to in that sub-paragraph, and also even if the condition referred to in sub-paragraph (c) is not met with respect to the bank, provided that the Supervisor is satisfied that granting the permit will not impair the development of competition and the prevention of concentration in the banking sector in general, and in the sector of the insurance referred to in sub-paragraph (a) in particular; for the purposes of this paragraph, "housing loan" – a loan not for a business purpose that is secured by a charge (security interest) over a right in a residential apartment or over a right in respect of a residential apartment.

For the purposes of this Chapter and of section 47, means of control held by the following shall not be counted –

"means of payment" – as defined in the Payment Services Law, 5779-2019;

"bank with a medium scope of activity" – a bank whose asset value exceeds 5% of the asset value of all banks in Israel and does not exceed 10% of the said asset value;

"bank with a wide scope of activity" – a bank whose asset value exceeds 20% of the asset value of all banks in Israel;

"issuance", of a debit card – entering into a debit card contract with a customer, and in the case of entering into a credit card contract with a customer, including an undertaking to extend credit by means of the card;

"credit card contract" – a contract between a customer and an issuer, under which the customer undertakes to pay the issuer the consideration for assets purchased from a supplier by means of the credit card, and the issuer undertakes towards the customer to pay the consideration to the supplier; the payment by the customer to the issuer may be by way of debiting the customer's account at a banking corporation or in any other manner;

"debit card contract" – a contract between a customer and an issuer for the use of a debit card;

"credit card" – a means of payment consisting of a plate or other object for repeated use, intended for the purchase of assets from a supplier without immediate payment of the consideration;

"bank card" – a means of payment consisting of a plate or other object for repeated use, intended for the withdrawal of money through automated banking machines or for the purchase of assets by debiting the account of a customer at a banking corporation and crediting another person by using the card in a device designated for that purpose at the supplier's place of business;

"debit card" – a credit card, bank card or payment card;

"payment card" – a means of payment consisting of a plate or other object for repeated use, intended for the purchase of assets from the supplier, in which monetary value may be accumulated by means of repeated loading, except for a plate or object as aforesaid that can be loaded with cash only and by means of which it is not possible to debit the customer's account;

"customer" – a person for whose use a debit card has been issued;

"issuer" – a person engaged in the issuance of debit cards;

"asset" – real property, movable property, money, services or rights;

"supplier" – a person who sells an asset in the course of business;

"transaction" – a transaction between a customer and a supplier for the sale of an asset;

"acquirer" – a person engaged in the acquiring of debit cards;

"acquiring", of transactions by debit card – payment to a supplier of the consideration for assets that a customer purchased from that supplier by means of a debit card against receipt of the consideration for the assets from the debit card issuer, and if the said payment to the supplier is made by the issuer – against receipt of the consideration for the assets directly from the customer;

"asset value", of a bank – the value of the bank's assets as appearing in the bank's balance sheet in the last annual financial report prepared on a consolidated basis in accordance with the generally accepted accounting rules applicable to it;

"issuance operation", of a debit card – all the operations and services ancillary to the issuance of a debit card, including the production of the card and its operation, but excluding the issuance itself and the determination of the commissions and costs to the customer involved in the production of the debit card and its use.

"bank with a narrow scope of activity" – a bank whose asset value as appearing in the bank's balance sheet in the last annual financial report prepared on a consolidated basis in accordance with the generally accepted accounting rules applicable to it, does not exceed, on the day of commencement of the Law for the Promotion of Competition, 10% of the asset value of all banks in Israel;

"financial body" – a banking corporation or a credit and deposit cooperative as defined in the Financial Services Supervision Law (Regulated Financial Services), 5776-2016;

"Law for the Promotion of Competition" – as defined in section 11b(d).

Notwithstanding the provisions of sections 10 to 12 –

A person who is not a bank or a foreign bank shall not engage in the receipt of monetary deposits in current accounts for the purpose of paying from them on demand by cheque.

"receipt of monetary deposits" – from thirty persons or more simultaneously, excluding –

"option warrant" – as defined in section 35p3 of the Securities Law;

"securities" – excluding shares and option warrants conferring the right to purchase shares;

"debentures" – as defined in section 35a of the Securities Law, provided that they are subject to a prospectus under section 15 of that Law;

"extension of credit" – excluding –

"regulator" – the Supervisor, the Supervisor of Financial Service Providers as defined in the Financial Services Supervision Law (Regulated Financial Services), 5776-2016, or the Commissioner of Capital Markets, Insurance and Savings, as the case may be;

"debentures" – including commercial paper, provided that it is subject to a prospectus under section 15 of the Securities Law, and the corporation's undertaking to pay in respect thereof a sum of money to the holder is at a date not earlier than 270 days from the day of the offer, and if the repayment period of the commercial paper has been extended by additional periods as referred to in section 23b of the Securities Law – the day of the offer shall be regarded as the first day of each additional extension period; for this purpose, "commercial paper" and "holder" – as defined in sections 1 and 35a of the Securities Law, respectively;

For the purpose of section 21, the receipt of funds by an insurer, and by a managing company for a provident fund under its management, shall not be regarded as the receipt of monetary deposits.

"payment system", "operator" of a payment system" and "participant" in a payment system" – as defined in the Payment Systems Law, 5768-2008;

"payment service provider" – as defined in section 22(a) of the Regulation of the Engagement in Payment Services and Payment Initiation Law, 5783-2023;

"payment services" – as defined in the Regulation of the Engagement in Payment Services and Payment Initiation Law, 5783-2023.

the Governor may permit a higher rate than that stated in paragraphs (1) to (3) if he considers that the value of the means of control in the real corporations has increased due to their profits or that the capital of the banking corporation has decreased due to its losses.

"significant financial body" – as defined in section 35b, and for this purpose the value of all assets of the financial body shall be calculated as the value of all its assets and the assets of financial bodies controlled by it;

"significant real corporation" – as defined in section 35b.

The Governor, with the consent of the Minister of Finance and with the approval of the Finance Committee of the Knesset, may prescribe an additional activity that a banking corporation shall be permitted to engage in, in addition to the activities enumerated in this Chapter, whether generally, for a particular type of banking corporation, or for a group within a particular type of banking corporation, all as the Governor shall so prescribe.

Notwithstanding the provisions of this Chapter, a banking corporation may hold means of control in a real corporation if the means of control are intended in good faith to serve as security for an obligation, provided that the banking corporation shall not vote at a general meeting of that corporation, except on resolutions under section 350 of the Companies Law, on resolutions concerning the voluntary winding-up of the corporation, or on resolutions that may prejudice its rights as a creditor.