Banking Ordinance, 1941

פקודת הבנקאות, 1941

Published: 1941-10-09Consolidated Hebrew text as of 2026-08-19 · Last amended 2026-03-31✓ Amendment status checked against the Knesset legislation record on 2026-09-29

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No. 26 of 1941

An Ordinance to consolidate and amend the law regulating the business of banking

The High Commissioner for Palestine hereby enacts, with the advice of the Palestine Council, as follows: –

Short Title§

This Ordinance shall be called the Banking Ordinance, 1941.

Interpretation§

(1)In this Ordinance the following terms shall have the meanings set out below, unless the context requires otherwise: –

"bank" – (deleted)

"banking business" – (deleted)

"banknote" – (deleted)

"company" – (deleted)

"arrears charges" and "shekel interest" – as defined in the Adjudication of Interest and Linkage Law;

"the Committee" – the advisory committee appointed under section 6;

"the Council" – (lapsed)

"banking institution" – (lapsed)

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

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

"Banking (Licensing) Law" – the Banking (Licensing) Law, 5741-1981;

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

"Adjudication of Interest and Linkage Law" – the Adjudication of Interest and Linkage Law, 5721-1961;

"Companies Ordinance" – the Companies Ordinance [New Version], 5743-1983;

"strike" – an organised, complete or partial cessation of work by a group of workers, including a go-slow strike and any other organised disruption of the normal course of work.

"dormant deposit" – a deposit, whether in Israeli currency or in foreign currency, in respect of which ten months have elapsed from the day on which the last instruction was received from the holder of the deposit.

(2)The meaning of any other term in this Ordinance shall be as defined in the Banking (Licensing) Law.

2a.§

(Repealed)

2b.§

(Repealed)

3.§

(Repealed)

3a.§

(Repealed)

Restriction on Use of the Title "Bank"§

(1)No person or group of persons, whether incorporated or unincorporated, other than a bank or a foreign bank, shall use or continue to use, without the consent of the Governor, the word "bank" or any word derived therefrom in the name under which they carry on business.

(2)Any person or group of persons, whether incorporated or unincorporated, who contravene the provisions of this section shall be liable to a fine of not more than five hundred shekels for each day on which they continue the offence.

(3)The Governor may, after consulting the Committee and after giving that person an opportunity to state their case, direct any person to delete from the name under which they carry on business, within a period to be specified by the Governor, the word "bank" or any word derived therefrom.

(4)The Governor shall not exercise the power conferred on him by subsection (3) in relation to a bank or a foreign bank so long as no direction has been given in respect of it under sections 8d or 8n.

(5)(Repealed)

(6)Where a corporation has failed to comply with a direction given to it under subsection (3) and has not chosen another name within the period specified by the Governor, the Governor shall choose a name for it and shall notify the Registrar of that corporation accordingly, and the Governor's notification shall have the same effect as a notification by the corporation of a change of its name that has been duly received and delivered, and the provisions of the law applicable to a change of name shall apply to the Governor's notification with the necessary modifications.

Names Liable to Mislead§

4a.

(a)Where a person who is not a banking corporation carries on business under a name that does not include the word "bank" or any word derived therefrom, but which is capable of implying that that person is engaged in an occupation reserved to a banking corporation under sections 13 or 21 of the Banking (Licensing) Law, the Governor may – after consulting the Committee and after giving that person an opportunity to state their case – in addition to his powers under section 4, direct that person to delete from the name under which they carry on business, within the period to be specified by the Governor which shall not be less than 28 days, any other word or expression capable of implying that that person is engaged in an occupation reserved to a banking corporation under sections 13 or 21 of the Banking (Licensing) Law.

(b)A direction under subsection (a) shall have the same effect as a direction under section 4(3), and a person who fails to comply with it shall be treated in the same way as a person who continues to use the word "bank" as part of their name without a permit.

Supervisor of Banks and his Powers§

(a)The Governor may appoint a Supervisor of Banks (hereinafter – the Supervisor), and upon appointment the Supervisor shall be an employee of the Bank of Israel and shall have general supervision and control over every banking corporation, and the Supervisor or those acting on his behalf shall have the power to require a banking corporation and also a director, employee or auditor of a banking corporation to provide information and documents in their possession relating to the business of the banking corporation and every corporation under its control, or to permit him to inspect, copy or photograph any such document; where information stored on a computer is required, the information shall be furnished in the manner required.

(b)A person who refuses to comply with a requirement under subsection (a) shall be liable to imprisonment of one year.

(c)The Minister of Police may authorise any employee of the Bank of Israel who is authorised under subsection (a) to act on behalf of the Supervisor to conduct investigations into offences under this Ordinance, under the Banking (Licensing) Law, or under the Bank of Israel Law, or into offences against the assets of customers of a banking corporation; an employee so authorised shall have all the powers vested in a police officer of the rank of inspector and above under the Criminal Procedure Ordinance (Testimony), and the provisions of that Ordinance shall apply to such investigations.

(c1)The Supervisor may, for the purpose of the supervision referred to in subsection (a), after consulting the Committee and with the approval of the Governor, issue directives relating to the manner of operation and management of a banking corporation, of an office holder therein and of any person employed by it, all in order to ensure its proper management and the protection of the interests of its customers, in order to prevent harm to its ability to fulfil its obligations and in order to support the stability of the financial system and its orderly functioning (in this Ordinance – proper banking management directives); such directives may be issued to all banking corporations or to a particular class of them.

(c2)

(1)Proper banking management directives need not be published in Reshumot (Official Gazette); however, the Supervisor shall publish in Reshumot (Official Gazette) a notice of the issuance of such directives and of the date of their commencement;

(2)Proper banking management directives and any amendment thereto shall be made available for public inspection at the offices of the Supervisor and shall be published on the Bank of Israel website, and the Governor may prescribe additional means of publication thereof.

(d)The Governor may assume for himself any power vested in the Supervisor.

Establishment of an Advisory Committee§

(1)The Governor may appoint an advisory committee to advise him on matters relating to banking business; this committee shall be composed of such persons and shall be appointed on such terms as the Governor shall think fit, and the Governor may at any time bring any such appointment to an end.

(2)The Governor may make Regulations prescribing the procedure to be followed at any meeting of the committee established in accordance with this section.

(3)One of the members of the Committee shall be a person appointed to that position by the Minister of Finance.

(4)The Committee may appoint from among its members sub-committees of one or more members, define their functions and delegate to them its powers; a member of the Committee under subsection (3) shall, by virtue of his appointment, be a member of every sub-committee appointed under this subsection.

(5)The proceedings of the Committee or any of its sub-committees are confidential, and no person shall disclose them or any information therefrom except with the approval of the Governor.

7.§

(Repealed)

Credit for the Purpose of Securing the Stability of a Banking Corporation§

(a)Where the Governor is of the opinion that, in order to secure the stability of a banking corporation, the banking corporation requires additional financial resources, the Bank of Israel may provide it with funds by discounting bills of exchange, promissory notes or other negotiable instruments or by means of secured loans to the satisfaction of the Governor.

(b)Credit under subsection (a) shall be on such terms as the Governor shall think fit, and he shall determine the collateral that the recipient of the credit is required to provide.

(b1)A charge (security interest) created as security for an obligation towards the Bank of Israel against the grant of credit to a banking corporation as referred to in subsection (a) shall be subject to the provisions of section 37 of the Bank of Israel Law, with the necessary modifications.

(c)The Governor's power under subsection (a) shall not derogate from his power under section 36(4) of the Bank of Israel Law.

Notice to a Banking Corporation of Defects§

8a.

(a)Where the Supervisor is of the opinion that a particular banking corporation has conducted its business in a manner liable to harm its ability to fulfil its obligations or the proper management of its business, he shall send the banking corporation a written notice in which he shall specify the defects, demand their rectification or the prevention of their harmful effects within a period to be specified in the notice, and give the banking corporation an opportunity to submit, within that period or within a shorter period as specified in the notice, its comments and objections regarding the defects or the demands for their rectification.

(b)Where a banking corporation has submitted comments and objections as referred to in subsection (a), the Supervisor shall decide on them as soon as reasonably practicable after receiving them and shall notify the banking corporation of his decision, and if he has demanded the rectification of the defects or the prevention of their harmful effects he shall specify the period within which the banking corporation is required to do so.

Power of the Supervisor in Determining Bad Debts§

8b.

(a)Where the Supervisor is of the opinion that a particular debt, in whole or in part, owed to a banking corporation is a bad debt, or that an asset of a banking corporation is recorded in its books at an amount exceeding its value at that time in a sale by a willing seller to a willing buyer, he may direct the banking corporation to set aside into an appropriate reserve an amount as required for that matter.

(b)A notice referred to in subsection (a) shall have the same effect as a notice under section 8a.

Measures to Prevent Harm§

8c.

(a)Where the Supervisor is of the opinion, after the expiry of the period specified in a notice under section 8a, that a banking corporation has not rectified the defects of which it was notified under section 8a or has not prevented their harmful effects, or is of the opinion, after having given the banking corporation an opportunity to present or submit its comments and objections, that measures need to be taken to prevent the banking corporation from being unable to fulfil its obligations or from causing harm to its customers or to holders of rights therein, he may, after consulting the Licences Committee –

(1)direct the banking corporation to refrain from categories of acts specified in that direction, except for the fulfilment of an obligation;

(2)prohibit the distribution of dividends or profits to the shareholders of the banking corporation and the granting of benefits to the members of the board of directors, the managers and the authorised signatories of the banking corporation;

(3)suspend or restrict the authority of a member of the board of directors, a general manager or an authorised signatory, and if he finds that this is insufficient, he may remove that person from their position; a person aggrieved by the Supervisor's decision regarding removal from position may appeal against it to the Governor.

(b)A direction under this section shall not be published in Reshumot (Official Gazette), and the claim that an act performed in good faith with a person who was not authorised to perform it in contravention of such a direction is void for the sole reason that it was performed in contravention of the direction shall not be heard.

Powers for the Preservation of the Stability of a Banking Corporation§

8d.

(a)Where the Governor is of the opinion, after consulting the Supervisor, that a particular banking corporation is unable to fulfil its obligations, or that there is a real concern that it will be unable to fulfil its obligations and there is no reasonable prospect that it will be able to do so again, or that it is unable, as a result of having managed its business in a manner deviating from proper banking management, to return an asset deposited with it, or that its board members or general managers have acted in a manner liable to harm the proper management of the business of the banking corporation, the Governor may, after having given the banking corporation a reasonable opportunity in the circumstances to present or submit its arguments, and after consulting the Licences Committee, give the banking corporation any direction referred to in section 8c(a), and may, with the approval of the Committee as defined in the Bank of Israel Law –

(1)(deleted)

(2)appoint an authorised administrator to manage the banking corporation as referred to in section 8d; the Governor may prescribe in rules eligibility conditions for the appointment of an authorised administrator, including conditions relating to education and professional experience and to the absence of a criminal record;

(3)appoint a special supervisor for the banking corporation to supervise its management as referred to in section 8g;

(4)appoint a management committee for the banking corporation to advise the authorised administrator.

(b)An appointment referred to in paragraphs (2) and (3) of subsection (a) may also be given to a State employee or to an employee of the Bank of Israel.

(c)Where the Governor is of the opinion that the circumstances of the matter and the public interest require that action be taken under subsection (a) without delay, he may act without consulting the Licences Committee and without having given the banking corporation an opportunity to submit or present its arguments; provided that he shall hear the banking corporation as soon as reasonably practicable after having acted under subsection (a) and shall bring the matter before the Licences Committee.

(d)(Repealed)

(e)(Repealed)

(f)The appointment of the supervisor referred to in subsection (a)(3) shall not be published in Reshumot (Official Gazette), and the claim that an act performed in good faith with a person who was not authorised to perform it or in contravention of a direction that was given is void for the sole reason that it was performed by a person who was not authorised to perform it or in contravention of a direction given to the banking corporation shall not be heard.

Reporting by a Banking Corporation of Embezzlement§

8d1.

(a)Where a banking corporation becomes aware that there is a reasonable concern that an employee or an office holder thereof was involved in an embezzlement the amount of which exceeds the amount prescribed by the Supervisor, it shall report the embezzlement as soon as possible to the internal auditor as referred to in section 14e and to the Supervisor.

(b)The report to the Supervisor shall include particulars as prescribed by the Supervisor; the Supervisor shall also prescribe the manner of the report, its timing and any other detail that he deems appropriate.

(c)For the purpose of this section –

"embezzlement" – an offence under one of the offences listed in Sections A, F and G of Chapter XI of the Penal Law, 5737-1977 (in this Ordinance – the Penal Law), all in relation to assets of the banking corporation and assets held in it or managed by it.

Report of the Supervisor§

8d2.

Once a year the Supervisor shall submit a report to the Finance Committee of the Knesset, detailing the number of embezzlements reported as referred to in section 8d1, and in respect of embezzlements in which the Supervisor has completed his handling – the manner in which they were handled and the findings that came to light, excluding the methods of obtaining the information; the Supervisor shall bring the report to the attention of the public in a manner to be prescribed by him, including by means of publication on the Bank of Israel website.

Offence against the Provisions of Sections 8c and 8d§

8e.

(a)A banking corporation that contravenes a direction given to it by the Supervisor under section 8c or that contravenes a direction given to it by the Governor under that section or by virtue of his power under section 8d(a) shall be liable to a fine of 100,000 liras.

(b)A person who acted as a member of the board of directors, as a general manager or as an authorised signatory despite the suspension or restriction of his authority or during his suspension shall be liable to imprisonment of four years or a fine of 100,000 liras.

(c)An authorised signatory of the banking corporation who actually participated in the commission of an offence dealt with in subsection (a) shall be liable to imprisonment of three years or a fine of 50,000 liras.

(d)A person who, at the time of the commission of an offence dealt with in subsection (a), was an active member of the board of directors, a general manager, a representative or chief or sole accountant of a banking corporation shall be liable to imprisonment of three years or a fine of 50,000 liras, unless that person proves one of the following –

(1)the offence was committed without his knowledge and his position did not require him to know of the act;

(2)he took all reasonable measures to ensure compliance with the directions given.

Offence against the Provisions of Section 8d1§

8e1.

(a)Where an embezzlement offence as defined in section 8d1(c) has been committed in a banking corporation and the banking corporation has failed to report it as referred to in section 8d1, the banking corporation shall be liable to a fine as prescribed in section 61(a)(2) of the Penal Law.

(b)The general manager of the banking corporation is obliged to supervise and do everything possible to ensure compliance with the provisions of section 8d1; a person who breaches that obligation shall be liable to a fine as prescribed in section 61(a)(1) of the Penal Law.

(c)Where an embezzlement offence as defined in section 8d1(c) has been committed in a banking corporation and the banking corporation has breached its obligation to report as referred to in subsection (a), there shall be a presumption that the general manager of the banking corporation has breached his obligation as referred to in subsection (b), unless the general manager proves that he did everything possible to fulfil his obligation.

Powers of an Authorised Administrator§

8f.

(a)An authorised administrator appointed under section 8d(a)(2) shall manage the banking corporation in accordance with directions received from the Governor, or from the Supervisor of Banks if the Governor has authorised the Supervisor to give directions.

(b)An authorised administrator shall have the same standing as a general manager of a banking corporation, and in addition every general manager who has not been suspended and every employee of the banking corporation is obliged to comply with the authorised administrator's directions.

(c)In addition to what is stated in subsections (a) and (b), the authorised administrator shall fulfil the functions of the board of directors of the banking corporation and its committees and shall have, subject to what is stated in section 8h(e), all the powers conferred and functions imposed on the board of directors and its members by the memorandum of association and articles of association of the banking corporation.

(d)The banking corporation shall pay the authorised administrator a salary as determined by the Governor.

(e)The authorised administrator is empowered, after consulting the management committee and with the approval of the Governor, to transfer to another all or part of the assets and liabilities of the banking corporation, including by means of the sale of the means of control therein.

Special Supervisor§

8g.

(a)A special supervisor appointed under section 8d(a)(3) shall supervise the acts of the board of directors of the banking corporation and the management of its business in accordance with directions received from the Governor, and also from the Supervisor of Banks – if the Governor has authorised the Supervisor to give directions.

(b)The Governor may permit the special supervisor to employ other persons for the purpose of fulfilling his functions.

The Management Committee§

8h.

(a)A management committee appointed for a banking corporation under section 8d(a)(4) shall advise the authorised administrator in the fulfilment of his functions under section 8(f).

(b)So long as the management committee is fulfilling its function, the board of directors and its members shall not fulfil their functions nor exercise their powers.

(c)The authorised administrator shall be the chairperson of the management committee.

(d)The banking corporation shall pay the members of the management committee a salary at the rate determined by the Governor.

(e)The management committee shall approve the balance sheet of the banking corporation as if it were a general meeting and shall appoint an auditor for the banking corporation, provided that this shall not derogate from the obligation to convene a general meeting.

Provision of Information§

8i.

(a)Where a direction has been given under section 8d, every member of the board of directors or general manager of the banking corporation, whether or not a suspension direction has been given in respect of them, and every other person employed by the banking corporation shall be obliged, upon the demand of the Governor, the authorised administrator, the special supervisor or a person authorised by them for that purpose, to deliver to them or to their agents the information, ledgers, documents or any other document which in the opinion of the person making the demand may serve to secure or facilitate the implementation of a direction under section 8d.

(b)A person who has failed to comply with a demand made to them under subsection (a) shall be liable to imprisonment of two years or a fine of 10,000 liras.

Suspension of Fulfilment of Obligations§

8j.

(a)The authorised administrator may, with the approval of the Governor, direct that within a period not exceeding ten days from the date of the giving of a direction under section 8d(a)(2), the banking corporation shall not fulfil its obligations whose date of fulfilment falls within that period or prior thereto.

(b)The Governor may extend the period referred to in subsection (a) by a further ten days, if he has given notice under section 8n of his intention to revoke the licence of the banking corporation, and the period within which its managers are entitled to submit their arguments has not yet elapsed, or a court Order for the winding up of the banking corporation or for the appointment of a receiver has not yet been made.

(c)The authorised administrator shall bring to the attention of the public every direction given under subsections (a) and (b) as soon as reasonably practicable after they are given.

(d)The banking corporation, the authorised administrator or the Governor shall not bear any liability by reason of the giving of the direction under subsection (a) or by reason of non-fulfilment of an obligation pursuant thereto.

Power to Guarantee§

8k.

(a)The Governor may, with the approval of the Government, publish notice in Reshumot (Official Gazette) that the Bank of Israel, or another banking corporation that has consented thereto and that the Governor has authorised for that purpose, shall be guarantor—

(1)for deposits made with a banking corporation in respect of which a directive has been given under section 8d, whether for the full amount of the deposits or up to a specified amount in respect of each deposit of the categories of deposits to be determined;

(2)for categories of other obligations of a banking corporation as referred to in paragraph (1), all or part of them, provided—

(a)that it has been found that the public interest requires doing so;

(b)that a guarantee under this section shall not be given for all the obligations of a banking corporation, unless in the opinion of the Governor there is a reasonable prospect that giving such a guarantee will enable the banking corporation to continue to conduct its business in an orderly manner.

(b)A guarantee under subsection (a) may be for an unlimited period, conditional or unconditional, all as detailed in the notice.

(c)Once a notice as aforesaid has been published, the guarantee shall be valid in accordance with what is stated in the notice even if the person guaranteed did not consent to the giving of the guarantee, and the banking corporation acting as guarantor shall be entitled at any time to recover from the banking corporation guaranteed any amount paid by virtue of the guarantee.

(d)The banking corporation guaranteed shall be entitled, notwithstanding any contrary condition, to undertake obligations towards the banking corporation acting as guarantor in connection with the giving of the guarantee given under subsection (a) and its conditions.

(e)If the Governor, with the approval of the Government, sees fit to cancel the guarantee given under subsection (a), he shall publish notice in Reshumot (Official Gazette) and in at least two daily newspapers of the cancellation and its date, which shall not be less than ninety days from the date of publication of the notice, and from that date onwards no person shall be entitled to claim payment of the obligation from the guarantor; however, a person who is entitled to the fulfilment of an obligation of the banking corporation guaranteed that falls due at a date later than the date of cancellation, and that obligation existed at the time the guarantee was in force, shall be entitled to recover from the guarantor until the expiry of thirty days from the day fixed for the fulfilment of that obligation, and if the guarantor has paid, the provisions of subsection (c) shall apply.

(f)The Governor shall not cancel a guarantee given by another banking corporation save with the consent of the banking corporation acting as guarantor.

(g)A guarantee given under this section shall have the same status as the giving of a guarantee under the Guarantee Law, 5727-1967.

Insolvency or Winding-Up Proceedings§

8l.

(a)In this section—

"office holder" — a trustee as defined in the Insolvency Law or an arrangement administrator appointed under section 326 of that Law, a trustee appointed under section 342l of the Companies Law, a receiver appointed under section 194 of the Companies Ordinance, and any other office holder whom the court is entitled to appoint in insolvency or winding-up proceedings conducted before it, all whether permanent or temporary;

"insolvency or winding-up proceedings" — proceedings conducted before the court under the Insolvency Law, under Part 8-A of the Companies Law or under section 194 of the Companies Ordinance;

"Insolvency Law" — the Insolvency and Economic Rehabilitation Law, 5778-2018;

"Securities Law" — the Securities Law, 5728-1968;

"debenture trustee" — a trustee appointed under Chapter V-A of the Securities Law;

"order for the opening of proceedings" — as defined in the Insolvency Law.

(b)An application by a creditor of a banking corporation or a shareholder therein for the opening of insolvency or winding-up proceedings in respect of the banking corporation shall not be filed with the court before it has been submitted to the Governor so that the Governor and the Supervisor may examine the exercise of their powers under any law, and the Governor has given his written consent thereto or ninety days have elapsed from the date on which it was submitted to the Governor, whichever is the earlier; the provisions of this subsection shall apply also to a person filing an application with the court in respect of a banking corporation under section 329(a) of the Insolvency Law, with the necessary modifications.

(c)In respect of the filing of an application for an order for the opening of proceedings in the matter of a banking corporation by a debenture trustee, the following provisions shall apply:

(1)In addition to the provisions of section 35h(d2b) of the Securities Law, if seven days have elapsed from the date of payment of principal or interest in accordance with the conditions of the instrument of obligation and payment as referred to in that section has not been made, the debenture trustee shall notify the Governor thereof;

(2)Notwithstanding the provisions of section 35h(d2b)(1) of the Securities Law, upon the expiry of 45 days from the date of non-payment as referred to in that section, the debenture trustee shall submit the application for an order for the opening of proceedings to the Governor, and not to the court; the debenture trustee shall submit the application to the court upon the expiry of 90 days from the date of the notice to the Governor under paragraph (1), and if the Governor's written consent was given at an earlier date, the following provisions shall apply:

(a)if 45 days have not yet elapsed from the date of non-payment — the application shall be submitted no later than the expiry of 45 days from the date of non-payment as aforesaid;

(b)if 45 days have elapsed from the date of non-payment as aforesaid — the application shall be submitted to the court promptly after receipt of the Governor's consent.

(d)The Governor shall be a party to every proceeding conducted in court within the framework of insolvency or winding-up proceedings in respect of a banking corporation under this section, and he is entitled to present his position in any such proceeding; the court shall not conduct a hearing in such a proceeding unless satisfied that a summons has been served on the Governor.

(e)If the court has ordered the opening of a proceeding under the Insolvency Law in the matter of a banking corporation, the date of submission of the application to the Governor under subsection (b) shall be deemed the date of filing the application with the court.

(f)The adoption of a decision under Part 8-A of the Companies Law for the voluntary winding-up of a banking corporation requires the written consent of the Governor; if a banking corporation has adopted a decision for its voluntary winding-up with the consent of the Governor under this subsection, the trustee in the proceeding shall be appointed on the proposal of the Governor or with his consent.

(g)If an authorised administrator has been appointed in respect of a banking corporation under section 8d(a)(2), the following provisions shall apply for as long as the appointment of the authorised administrator remains in force:

(1)a person submitting an application to the Governor under the provisions of subsection (b) shall also deliver a copy of the application to the authorised administrator;

(2)the provisions of subsection (d) regarding the giving of an opportunity for the Governor to present his position and regarding summoning him to the hearing shall apply also in respect of the authorised administrator;

(3)notwithstanding the provisions of sections 342k, 342x and 342z of the Companies Law, the court shall not issue a winding-up order under Part 8-A of the Companies Law in the matter of the banking corporation on the application of a shareholder therein, and the banking corporation or a meeting of its shareholders shall not adopt a decision for the voluntary winding-up of the banking corporation;

(4)notwithstanding the provisions of section 36 of the Insolvency Law, including as applied under section 326 of that Law and under section 342n of the Companies Law, if the court has ordered the opening of insolvency or winding-up proceedings in respect of the banking corporation, it may appoint the authorised administrator as office holder in the proceeding, if it is satisfied, after giving the creditors of the banking corporation an opportunity to present their arguments, that doing so will assist in achieving the objectives of the proceeding; if the court has decided to appoint an authorised administrator as office holder as aforesaid, it shall determine his powers and duties as office holder having regard, inter alia, to the need to ensure that no conflict of interests arises between them and his role and status as authorised administrator, and the court may appoint an additional office holder alongside him.

Restriction on Decisions of General Meeting of Shareholders§

8m.

A decision of the general meeting of shareholders of the banking corporation, or of holders of other rights therein, that is inconsistent with what is stated in sections 8c to 8k or with an act performed or a directive given thereunder, shall be of no effect.

8n.§

(Repealed)

Declaration of Cessation of Services§

8o.

(a)If the Supervisor has found that a particular banking corporation is unable to conduct its business in an orderly manner due to a strike in that banking corporation or in another banking corporation, he may declare that the banking corporation has ceased to provide services (hereinafter — cessation), and the declaration may provide that it shall apply to all of the banking corporation's services or to part of them.

(b)The declaration shall be published in Reshumot (Official Gazette) and in at least four daily newspapers published in Israel.

(c)The declaration shall specify the date on which the banking corporation ceased to provide services, and it may specify different cessation dates for different services.

Cancellation§

8p.

Upon cancellation of the declaration, different cancellation dates may be fixed for different services.

Postponement of Dates§

8q.

(a)Where it has been agreed between the banking corporation in cessation and a person that an act is to be performed or an obligation fulfilled, which the banking corporation or the person is required or entitled to perform during the period between the declaration and its cancellation, the date shall be postponed until the expiry of three business days from the day of cancellation of the declaration, provided that the act or the fulfilment of the obligation falls within the scope of the services to which the declaration applies.

(b)The postponement of a date under this section shall apply also in respect of a date fixed in a judgment or in another decision of a court or of any other judicial or quasi-judicial authority under law.

Interest and Linkage Differentials§

8r.

(a)If an obligation whose repayment date has been postponed under section 8q bore interest before the cessation, the obligation shall continue to bear interest until its new repayment date, at the rate that applied during the period before the cessation.

(b)If an obligation whose repayment date has been postponed under section 8q was index-linked, the duty to pay linkage differentials as agreed shall continue to apply during the period of cessation; for this purpose, "index-linked obligation" means an obligation whose amount, in whole or in part, is linked to the exchange rate of the Israeli currency, to the cost of living index or to the increase in the price of any other thing.

(c)The Governor of the Bank of Israel may direct that during the period of cessation a person shall be entitled or required to pay to the Bank of Israel any amount that he owes to the banking corporation in cessation, and such payment shall have the same status as payment to the banking corporation in cessation; a directive under this subsection shall be brought to the knowledge of the debtors in the manner directed by the Governor.

Execution of Payment Order§

8s.

A person who, before the date of the cessation, drew a cheque on the banking corporation, or gave another written instruction to make a payment from his account in the banking corporation, and the execution of the instruction falls within the scope of the services to which the declaration applies, the amount specified in the instruction shall be deemed to have been paid on its due date if the banking corporation paid it within three business days after the cancellation of the declaration.

Limitation of Liability of the Banking Corporation§

8t.

A banking corporation in cessation shall not bear criminal or civil liability for an act or omission arising from the cessation of the services to which the declaration applies.

Defence under Criminal Law§

8u.

(a)A person who draws a cheque on a banking corporation in cessation shall not bear criminal liability under section 14 of the Criminal Law Amendment Law (Offences of Fraud, Extortion and Exploitation), 5723-1963 (hereinafter — the Penal Law), if the absence of an obligation on the banking corporation to honour the cheque on the date specified therein as the date of its drawing arose solely from the postponement of the date under section 8q.

(b)For the purpose of section 15(c) of the Penal Law, the period between the declaration and its cancellation shall not be counted in the sixty days in respect of a cheque drawn on the banking corporation in cessation where the honouring of the cheque falls within the scope of the services to which the declaration applies.

Submission of Reports to the Supervisor of Banks§

(1)Every banking corporation is required to submit to the Supervisor of Banks:—

(a)not later than twenty-one days after the last day of each month, a report drawn up in the form referred to in the First Schedule to this Ordinance, detailing the assets and liabilities of the banking corporation at the close of business on the last day of the preceding month;

(b)not later than twenty-eight days after the last day of the months of March and September, a report drawn up in the form set out in the Second Schedule to this Ordinance providing an analysis of current loans and of bills brought for discount up to 31 March and 30 September;

provided that in the case of a foreign bank, the reports referred to in paragraphs (a) and (b) of this section shall contain only particulars relating to the offices and branches (or branch) of the foreign bank situated in Israel;

provided that the Governor may by Order amend from time to time the form of the First Schedule and the Second Schedule and the dates on which the material required in the Second Schedule is to be compiled and sent to the Supervisor of Banks.

(2)A banking corporation that fails to comply with the requirements set out in paragraphs (a) and (b) of subsection (1) of this section shall be liable to a fine of not more than five hundred shekels for each day during which it continues the offence.

Presentation and Publication of Balance Sheet§

10.

(1)A banking corporation shall publish its audited annual financial report, or a summary thereof, at the time, in the form and to the extent directed by the Supervisor.

(2)The Supervisor of Banks may, once a year, require in writing any banking corporation to prepare, present and publish, within the time specified in the requirement, a report on its assets and liabilities as at a date specified in the requirement; the report shall include a comparative balance sheet of the banking corporation's assets and liabilities at that date alongside its assets and liabilities as detailed in the most recent audited balance sheet of the banking corporation and in the manner in which the audited balance sheet was drawn up.

(3)Every banking corporation to which this section applies that has not complied with its requirements shall, upon conviction, be liable to a fine of not more than one hundred pounds.

Persons Unfit to Participate in the Management of Banks§

11.

(1)Without prejudice to anything stated in section 73 of the Companies Ordinance, any person—

(a)who was a director of a banking corporation that was wound up by a court, or who was connected directly or indirectly with the management of such a banking corporation, or—

(b)who was sentenced by a court to a period of imprisonment for an offence involving moral turpitude and has not received a full pardon for the offence for which he was sentenced—

shall not, without the express authorisation of the Governor, serve or continue to serve as a director of any banking corporation or be connected with the management of any such banking corporation, whether directly or indirectly.

(2)Any person who contravenes subsection (1) of this section shall, upon conviction, be liable to imprisonment for a period of not more than two years or to a fine of not more than twenty-five thousand shekels, or to both penalties.

Approval of Appointment of an Office Holder§

11a.

(a)No person shall serve as an office holder in a banking corporation unless notice has been given to the Supervisor at least sixty days before the commencement of service, and the Supervisor has not notified his objection to the appointment within the said period, or has notified his consent thereto.

(b)The Supervisor's decision to object to an appointment shall be reasoned in writing and shall be given after the candidate has been given an opportunity to present his arguments and after consultation with the Licences Committee, and he shall take into account in this regard, having regard, inter alia, to the particular needs of the banking corporation, the suitability of the candidate for the proposed position, including his business experience, integrity, honesty, and connections, of any kind, with the banking corporation or with an office holder in the banking corporation, and if the candidate has previously served as an office holder in a banking corporation — also his performance during the period of his service as aforesaid; in respect of a candidate for the position of director, the Supervisor shall also take into account the other occupations and businesses of the candidate and the suitability of the composition of the board of directors to the fields of activity of the banking corporation.

(c)(Repealed)

(d)(Repealed)

(e)If an office holder has been appointed and, after his appointment, additional or new particulars come to light in respect of the considerations referred to in subsection (b), the Supervisor may, after giving him an opportunity to present his arguments and after consultation with the Licences Committee, direct the cessation of his service, by reason of the additional or new particulars as aforesaid.

(f)If the Supervisor has notified his objection to an appointment as referred to in subsection (a) or if the Supervisor has directed the cessation of service as referred to in subsection (e), the person whose candidacy was disqualified, or the office holder whose service was ceased, as the case may be, may appeal against the Supervisor's decision to the Governor.

(g)The provisions of this section shall apply also to the service of a director of a banking corporation as chairman of its board of directors, with the necessary modifications.

(h)

(1)For the purposes of subsections (a), (e) and (f), "office holder" means a director, general manager, internal auditor and legal adviser, as well as any person whom the Supervisor shall determine; the Supervisor shall determine for each banking corporation which of the position holders in that banking corporation is required to have the appointment approved, provided that his determination shall not include more than seven position holders in the banking corporation;

(2)(Repealed)

Prevention of Conflict of Interests§

11a1.

A person who controls a significant real corporation, a person connected to such a controller, or an office holder in a significant real corporation shall not be appointed or serve as a director in a banking corporation that is a significant financial body; the Supervisor may give directives regarding the continuation of service of a director during sale proceedings as referred to in section 35b(e) of the Banking (Licensing) Law; in this section—

"person connected to the controller" — a relative or partner of a controller, or a person with an affiliation as defined in section 240(b) of the Companies Law, to the controller;

"financial body" and "real corporation" — as defined in section 28 of the Law for the Promotion of Competition and Reduction of Concentration;

"significant financial body" — a financial body listed in the list of significant financial bodies published under section 29 of the Law for the Promotion of Competition and Reduction of Concentration;

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

"controller", in a significant real corporation — including a holder of a controlling block as defined in the Companies Law, in a significant real corporation that has no other controlling shareholder;

"significant real corporation" — a real corporation listed in the list of significant real corporations published under section 30 of the Law for the Promotion of Competition and Reduction of Concentration.

Information from Shareholders§

11b.

(a)The minutes of the general meeting of a banking corporation, in its decisions on the matters listed below, shall set out the names of those present at the meeting, the names of those who voted, the rate of holdings of voting rights by virtue of which they voted, and the manner of their voting:

(1)amendment of the memorandum or articles of association;

(2)appointment or cessation of service of a director;

(3)approval of acts or transactions requiring approval of the general meeting under the provisions of sections 255 and 268 to 275 of the Companies Law;

(4)a distribution under Chapter II of Part 7 of the Companies Law;

(5)approval of a merger under section 320 of the Companies Law.

(b)The Supervisor may require any person who was present at or who voted in a particular general meeting of a banking corporation, to provide particulars as to his identity, particulars as to the identity of the person on whose behalf he is acting as agent or trustee, and if he is a corporation — particulars as to those who control it.

(c)A banking corporation all of whose holders of means of control are not required to hold a permit under the provisions of section 34(b) of the Banking (Licensing) Law, or a banking corporation to which the provisions of the Bank Shares (Arrangement) Law (Temporary Provision), 5754-1993, apply and in respect of which no shares committee is serving under that Law (in this Ordinance — a banking corporation without a controlling core), shall send to the Supervisor the minutes of the general meeting at which a decision was adopted concerning the appointment or cessation of service of a director, within ten days of the date of the meeting.

Appointment, tenure and termination of tenure of directors in a banking corporation that is a public company§

11c.

(a)In a banking corporation that is a public company as defined in the Companies Law, 5759-1999, the following provisions shall apply with respect to the appointment of directors, their tenure and the termination of their tenure:

(1)The vote at the general meeting on the appointment of directors and on the termination of their tenure shall be held for each candidate for office or for each director, as the case may be, separately;

(2)The board of directors shall not be entitled to appoint directors to the banking corporation, and shall not be entitled to propose candidates for the office of director to the Committee for the Appointment of Directors in Banking Corporations appointed pursuant to section 36a of the Banking (Licensing) Law;

(3)Notwithstanding the provisions of paragraph (2), the board of directors shall be entitled to appoint directors to the banking corporation if a vacancy on the board of directors arose after the previous annual meeting, or with the approval of the Supervisor, provided that the term of office of a director so appointed shall end no later than the next annual meeting, and all this unless the articles of association of the banking corporation do not permit it;

(4)A general meeting whose agenda includes the appointment of directors or the termination of their tenure shall not be convened unless the banking corporation has published an advance notice thereof in the manner in which the notice of convening of a general meeting is published, at least 21 days before publication of the notice of convening of the general meeting, and the advance notice was also delivered to the Supervisor at the same time;

(5)Resolutions of the general meeting on the appointment of a director or on the termination of his tenure shall be adopted by a majority of votes of those participating in the vote; in counting the votes of those participating in the vote, abstentions shall not be taken into account, unless otherwise provided in the articles of association of the banking corporation;

(6)If the number of candidates for the office of director who obtained a majority of the votes of those participating in the vote at the general meeting exceeds the number of vacant positions for such office, the candidates who obtained the highest number of votes in favour at the general meeting shall be elected, unless the articles of association of the banking corporation provide for another equal mechanism approved by the Supervisor.

(b)The provisions of this section shall prevail over any conflicting provision of law.

Proposal of candidates for the office of director in a banking corporation without a controlling core§

11d.

(a)In a banking corporation without a controlling core, the following provisions shall apply with respect to the proposal of candidates for the office of director:

(1)The Committee for the Appointment of Directors in Banking Corporations appointed pursuant to section 36a of the Banking (Licensing) Law (in this section – the Committee) shall propose candidates for the office of director to the general meeting of the banking corporation;

(2)The Committee shall propose, in accordance with the provisions of paragraph (1), candidates for the office of director, equal in number to the vacant positions required to complete the maximum number of directors pursuant to the proper banking management directives on the board of directors issued by the Supervisor pursuant to section 5(c1) (in this subsection – the directive on the board of directors), plus one additional candidate for each category of qualification that must be appointed: an external director pursuant to the Companies Law, 5759-1999, an external director pursuant to the directive on the board of directors, and another director – all of whom must meet the conditions set out in section 11e(b);

(3)In addition to the Committee, only the following shall be entitled to propose candidates for the office of director to the general meeting of the banking corporation:

(a)a holder of more than two and a half percent of a particular type of means of control in the banking corporation (in this section – a holder);

(b)two or three holders of means of control in the banking corporation, each of whom holds more than one percent and not more than two and a half percent of a particular type of means of control in the banking corporation, who together hold not less than two and a half percent and not more than five percent of a particular type of means of control as aforesaid (in this section – a group of holders), provided that each member of the group of holders has delivered to the banking corporation a report on his holdings as referred to in section 36(b)(1) of the Banking (Licensing) Law, and for at least three months prior to the notice of convening of the general meeting, no objection by that member of the group of holders to disclosure as referred to in section 36(b)(1)(c) was in force;

(4)A holder or a group of holders, including every member of the group of holders, shall not propose pursuant to the provisions of paragraph (3) more than one candidate for the office of director, and shall not propose additional candidates for the office of director as long as a director appointed pursuant to their proposal is serving, except pursuant to a permit granted by the Governor after consultation with the Licensing Committee; the provision of this paragraph shall not apply to the proposal of a candidate to replace a serving director who was elected pursuant to the proposal of the holder or the group of holders, as the case may be;

(5)The calculation of the rates of holdings of holders as referred to in paragraph (3) shall be at the time of dispatch of the proposal of the candidate for the office of director; however, for the purpose of bringing the proposal before the general meeting, the holders as aforesaid must hold the said rates of holdings also on the record date as defined in section 182(b) and (c) of the Companies Law, 5759-1999.

(b)The provisions of this section shall prevail over any conflicting provision of law.

Appointment, tenure and termination of tenure of directors in a banking corporation without a controlling core§

11e.

(a)The provisions of section 11c(a), except paragraph (3), as well as the following provisions, shall apply to the appointment of directors in a banking corporation without a controlling core, their tenure and the termination of their tenure:

(1)A vote on the appointment of directors or on the termination of their tenure shall be held only at the annual meeting or at a meeting convened pursuant to section 35a of the Banking (Licensing) Law, unless the Supervisor has approved a vote as aforesaid at a special meeting;

(2)The advance notice referred to in section 11c(a)(4) shall also be delivered, at the time referred to in that section, to the Committee for the Appointment of Directors in Banking Corporations appointed pursuant to section 36a of the Banking (Licensing) Law (in this section – the Committee);

(3)An office holder in the banking corporation, except an external director in the framework of his service on the Committee for the Appointment of Directors pursuant to section 36a of the Banking (Licensing) Law, shall not act towards the appointment of a particular director or towards preventing his appointment; however, a director shall be entitled to propose his own candidacy for the office of director to the Committee;

(4)

(a)The term of office of a director who is not an external director as defined in section 36a(b)(3) of the Banking (Licensing) Law shall be not more than three years, and he may be reappointed for additional terms not exceeding three years each, provided that his cumulative terms of office shall not exceed nine years;

(b)Notwithstanding the provisions of sub-paragraph (a), if the banking corporation became a banking corporation without a controlling core, a director serving therein on the eve of its becoming a banking corporation without a controlling core may continue to serve until the next annual meeting even if his cumulative terms of office would thereby exceed nine years;

(5)At a general meeting of the banking corporation, more than half of the directors who served immediately after the previous annual meeting shall not be replaced, unless the approval of the Supervisor has been obtained; if the number of directors to be replaced at a general meeting as aforesaid exceeds half, by reason of the provisions of paragraph (4), half of the serving directors who have served for the longest period shall retire at that general meeting, and the remaining directors shall be entitled to continue to serve until the next annual meeting; where two or more directors among those aforesaid have served for an equal period, those of them as the general meeting shall determine shall retire;

(6)A director, except an external director as defined in the Companies Law, 5759-1999, whose term of office has ended, and as a result the number of directors in the banking corporation has fallen below the appropriate number of directors determined by the Supervisor pursuant to section 35a of the Banking (Licensing) Law, or as a result the composition of the board of directors does not meet all the requirements of law as referred to in that section, may, with the approval of the Supervisor, continue in his position for a period of six months, or until the number of directors has been completed to the appropriate number as aforesaid or until the composition of the board of directors has been completed so as to meet the requirements of law, as the case may be, whichever is earlier; if a director has decided to continue in his position pursuant to the provisions of this paragraph, and the Supervisor's approval for the continuation of his tenure has been granted, the director shall notify the banking corporation accordingly; however, notwithstanding the continuation of his tenure as aforesaid, he shall be regarded, for the purposes of section 35a of the Banking (Licensing) Law, as a director whose tenure has ended.

(b)

(1)In a banking corporation without a controlling core, a person shall not be appointed or serve as a director if any of the following applies to him:

(a)he or his relative holds means of control of any type in the banking corporation, in a corporation controlled by the banking corporation or in a substantial holder, except for holdings of traded shares at a rate not exceeding one quarter of one percent of the issued and paid-up capital of any of them;

(b)a person who, in the two years preceding the date of appointment or from the date of appointment onwards, has, or a person with whom he is in a close relationship has, an affiliation with the banking corporation or a corporation under the control of the banking corporation, with an office holder in the banking corporation or with a substantial holder, and also a person who, from the date of appointment onwards, has an affiliation with a relative of an office holder in the banking corporation, with a relative of a substantial holder or with a partner of a substantial holder; for this purpose, service as a director in a banking corporation without a controlling core by a candidate for re-appointment shall not be considered an affiliation;

(2)Without derogating from the provisions of paragraph (1)(b), a person shall not serve as a director if he, or a person with whom he is in a close relationship, has business or professional connections with the banking corporation or a corporation under the control of the banking corporation, with an office holder in the banking corporation, or with a substantial holder who proposed that candidate for the office of director, even if such connections are not on a regular basis, except for negligible connections;

(3)Without derogating from the provisions of paragraphs (1) and (2), a director whose candidacy was proposed by the Committee pursuant to section 11d(a)(1) shall not be appointed or serve if any of the following applies to him:

(a)he has an affiliation with a member of the Committee at the time of appointment;

(b)the matter referred to in section 36b(b)(3) of the Banking (Licensing) Law applies to him;

(c)he has been convicted of an offence which, by reason of its nature, gravity or circumstances, renders him unfit to serve in the position, or an indictment for such an offence is pending against him;

(d)the matter referred to in section 240(c) of the Companies Law, 5759-1999 applies to him;

(4)A director whose candidacy was proposed by the Committee pursuant to section 11d(a)(1) shall have professional qualifications or accounting and financial expertise, in accordance with directives issued pursuant to section 240(a1) of the Companies Law, 5759-1999.

(c)Notwithstanding the provisions of subsection (b), a director serving in a banking corporation on the eve of its becoming a banking corporation without a controlling core may continue to serve until the end of his term of office even if the conditions prescribed in that subsection are not met in his case, but not for more than three years from the date on which the banking corporation became a banking corporation without a controlling core, whichever is earlier.

(c1)The Supervisor may approve the appointment or service as director of a person who, in the two years preceding the date of appointment or from the date of appointment onwards, has, or a person with whom he is in a close relationship has, an affiliation with a substantial holder, with a relative of a substantial holder or with a partner of a substantial holder, even if such affiliation is not negligible, if the Supervisor has found that in the circumstances of the matter such affiliation does not raise a concern of a conflict of interests in the tenure.

(d)The provisions of this section shall prevail over any conflicting provision of law.

(e)In this section –

"general meeting", "special meeting" and "annual meeting" – as defined in the Companies Law, 5759-1999;

"close relationship" – as defined in section 36b(a) of the Banking (Licensing) Law;

"affiliation" – the existence of employment relations, the existence of business or professional connections on a regular basis, except for negligible connections, as well as service as an office holder; however, retail business connections between a corporation and a customer shall not be considered an affiliation;

"substantial holder" – a person who holds more than two and a half percent of a particular type of means of control in the banking corporation, a person who controls such a holder, a person controlled by any of them, a member of a group of holders as defined in section 11d(a)(3)(b), a person who controls a member of a group of holders as aforesaid, and a person controlled by any of them.

Annual fees§

12.

(1)A banking corporation shall pay to the State Treasury each year a licence fee and an additional fee for each branch; the Minister of Finance shall prescribe by Order, with the approval of the Finance Committee of the Knesset, the rates of the fees and the dates of their payment, and reduced fee rates may be prescribed for a foreign bank having regard to the extent of its activity in Israel.

(2)The Minister of Finance may prescribe in Regulations provisions concerning reports that a banking corporation is required to submit for the purpose of calculating the fees and concerning the procedures for their payment.

(3)A banking corporation that has not paid a fee on its due date shall be liable to a fine of five hundred shekels for each day of delay.

12a.§

(Repealed)

Early repayment of a loan§

13.

(a)A person who received a loan from a banking corporation for the purpose of purchasing a residential apartment or against a mortgage on a residential apartment may, notwithstanding any agreement providing otherwise, repay it before the date fixed for its repayment, on the following conditions:

(1)The amount of the early repayment shall not be less than ten percent of the original amount of the loan or ten percent of the outstanding balance of the loan together with the interest and linkage differentials that have accrued and have not been repaid until the actual date of repayment, whichever is higher;

(2)The banking corporation may make early repayment as aforesaid conditional upon the payment of a commission on the conditions and at the rate prescribed by the Governor by Order after consultation with the Committee and with the approval of the Minister of Finance and the Finance Committee of the Knesset.

(b)The provisions of subsection (a) shall also apply to a loan as referred to therein in respect of which the banking corporation has assigned its rights against the borrower to a person who is not a banking corporation.

(c)A banking corporation shall not assign a loan of the type referred to in subsection (a) unless arrangements have been made with the assigning banking corporation or with another corporation ensuring that the service to the customer will not be materially impaired.

Joint account and joint safe-deposit box§

13a.

(a)Where a banking corporation has received funds, securities or other negotiable instruments in a joint account in respect of which it was agreed with the banking corporation that upon the death of one of the account holders the surviving account holder, or a person acting lawfully on his behalf, shall be entitled to continue to carry out transactions in that account, the condition shall remain in force, for the purposes of the relations between the banking corporation and the account holders, even after the death.

(b)The provisions of subsection (a) shall apply, with the necessary modifications and without derogating from the provisions of section 13(b) of the Estate Tax Law, 5709-1949, to a safe-deposit box that a banking corporation has rented to two or more persons on the said condition.

Dormant deposits§

13b.

(a)A banking corporation shall attempt to make contact with the holder of a dormant deposit close to the date of its maturity; in respect of a deposit redeemable on demand, the date of maturity shall be deemed to be the day on which the deposit became a dormant deposit.

(b)This section shall also apply to funds received in respect of securities held in custody with a banking corporation, and the duty to attempt to make contact with the holder of the deposit shall apply close to the date of receipt of the funds.

(c)If a banking corporation has not succeeded in making contact with the holder of the deposit within two months, it shall invest the funds to his credit in the manner prescribed by the Governor with the approval of the Minister of Finance and the Finance Committee of the Knesset.

(d)This section shall not apply to a dormant deposit in an amount not exceeding one hundred shekels or such other amount as prescribed by the Governor with the approval of the Minister of Finance and the Finance Committee of the Knesset; however, a banking corporation may act in accordance with the provisions of this section also in respect of a deposit in an amount less than the said amount.

Issue of banknotes§

14.

A banking corporation shall not issue a bearer note redeemable on demand.

Ratio between various items§

14a.

(a)If the Governor is of the opinion that it is necessary for the purpose of maintaining the stability of banking corporations, he may, after consultation with the Committee, prescribe by Order proportional ratios that banking corporations are required to maintain – from the date prescribed in the Order – in respect of the items, or categories of items, in paragraphs (1) to (5) as defined in the Order, as against the items, or categories of items, in paragraphs (6) to (9) as defined in the Order; and the items are as follows:

(1)guarantees given to secure credit;

(2)guarantees given otherwise than to secure credit;

(3)commitments given in connection with documentary credit;

(4)commitments given in connection with acceptances, endorsements and re-discounting;

(5)contingent liabilities not specified in paragraphs (1) to (4);

(6)deposits held with it;

(7)loans received by it;

(8)paid-up capital, capital funds and reserve funds, including the balance of undistributed net profits;

(9)assets, including debts due to it.

(b)A banking corporation that has contravened a provision prescribed by Order pursuant to subsection (a) shall be liable to pay to the Bank of Israel, for each day on which the contravention continues, a certain percentage of the amount by which the guarantees or commitments exceeded the ratio prescribed in the Order; the percentage shall be prescribed by the Governor by Order, after consultation with the Committee, and shall not exceed 10% per annum.

(c)Where a banking corporation has contravened a provision prescribed by Order pursuant to subsection (a), the Governor may direct it that until further notice it shall not continue to undertake commitments and give guarantees as referred to in paragraphs (1) to (5) of subsection (a), to extend credit, to invest funds or to distribute profits, provided that the Governor shall not do so except after giving a warning. A direction as aforesaid may apply to all or some of the said acts and may be conditional.

(d)A banking corporation that has contravened a direction given pursuant to subsection (c) shall be liable to a fine of 10,000 liras, and every manager or responsible officer who knowingly carried out the act constituting the contravention of the direction or failed to take reasonable measures to prevent its contravention shall be liable to imprisonment of two years.

Offences by managers of the banking corporation§

14b.

(a)A member of the board of directors or a business manager of a banking corporation who knowingly conducted the affairs of the banking corporation in a manner that impaired its ability to meet its obligations shall be liable to imprisonment of four years or a fine of 100,000 liras.

(b)A member of the board of directors or a business manager of a banking corporation who knowingly conducted the affairs of the banking corporation in a manner that impaired the proper management of its business shall be liable to imprisonment of one year or a fine of 20,000 liras.

Offences relating to entries in books§

14c.

A banking corporation that has contravened the provisions of the Companies Ordinance with respect to the keeping of books and registers by a company shall be liable to a fine of 100,000 liras, and every signatory who actually participated in the commission of the offence and every person who at that time was a member of the board of directors, a business manager, a chief accountant or individual of the banking corporation shall be liable to imprisonment of two years or a fine of 25,000 liras, unless that person has proved one of the following:

(1)the offence was committed without his knowledge and his position did not require him to know of the act;

(2)he took all reasonable measures to ensure compliance with the said provisions.

Guarantee by a Banking Corporation for Bill Brokerage§

14d.

(a)For the purposes of this Section –

"bill" – a bill of exchange or promissory note within their meaning in the Bills of Exchange Ordinance;

"subsidiary" – within its meaning in the Securities Law, 5728-1968, except for a subsidiary that is a banking institution.

(b)A banking corporation that brokers a bill between a seller and a buyer, or that sells a bill made by another person, shall be a guarantor towards the buyer for the payment of the bill until the expiry of 12 months from the date of payment of the bill, unless the bill has been transferred out of the buyer's hands otherwise than by operation of law; this provision is in addition to and does not derogate from any duty under any other law, and a guarantee under this Section shall always be regarded as a guarantee for the securing of credit dealt with in section 14a(a)(1).

(c)Where a banking corporation has paid a bill pursuant to the provisions of subsection (b), then –

(1)if the banking corporation was liable for payment by reason of brokering the bill between a seller and a buyer – it is entitled to have recourse against the seller and against all parties liable on the bill towards the seller and to recover from them;

(2)if the banking corporation was liable for payment by reason of the sale of the bill it held – it shall have all the rights it had against all parties on the bill before it sold it.

(d)In a claim against a banking corporation under subsection (b), a banking corporation shall be estopped from pleading that it did not broker or did not sell a bill if any one of the following is proved:

(1)the buyer delivered to the banking corporation or to the subsidiary the funds used for the purchase of a bill for the purpose of effecting the purchase or for the purpose of another investment by the recipient;

(2)the buyer delivered the funds as stated in paragraph (1) at the offices of the banking corporation to an officer of the banking corporation or to another person in circumstances in which it was reasonable to assume that he was acting as an officer of the banking corporation within the scope of his duties in the banking corporation.

(e)The provisions of subsections (d) and (g) shall not apply if the money was delivered outside Israel to a subsidiary conducting its business abroad and the money was delivered for the purpose of purchasing a bill whose place of payment is not in Israel.

(f)The provisions of this Section shall not apply to a State bill, a Jewish Agency bill, or a bill made by a national institution designated by the Governor with the approval of the Finance Committee of the Knesset.

(g)This Section shall apply notwithstanding any agreement providing otherwise, unless the agreement was made in writing and the buyer of the bill is a banking corporation or another buyer in respect of whom the Supervisor has given a general or special approval to that effect.

Internal Auditor§

14e.

(a)The board of directors of a banking corporation shall appoint an internal auditor for the corporation on the recommendation of the audit committee of the board of directors (hereinafter – the audit committee).

(b)The internal auditor shall examine, inter alia, the regularity of the operations of the banking corporation from the standpoint of compliance with the law, maintenance of integrity, maintenance of economy and efficiency, and maintenance of proper banking procedure, and shall also examine whether the directives of the Supervisor of Banks are being observed.

(c)The provisions of the following sections of the Internal Audit Law, 5752-1992 (in this Section – the Internal Audit Law) shall apply to the internal auditor, subject to the other provisions of this Section and with such modifications as are required by the matter: 3(a), except paragraph (2), 7 to 10, 14(b) and (c), and 24(c); however –

(1)notwithstanding the provisions of paragraph (5) of section 3(a) of the Internal Audit Law, the Supervisor may, in exceptional cases, approve the appointment of an internal auditor who does not fulfil the requirements stated in that paragraph, if the Supervisor has found that such person has significant experience in senior positions in the fields of activity of a banking corporation and has undertaken to participate in a training course as stated in that paragraph as soon as practicable after his appointment; the provisions of this paragraph shall apply notwithstanding the provisions of section 147 of the Companies Law, 5759-1999 in relation to a banking corporation that is a public company;

(2)in section 7 of the Internal Audit Law, wherever appearing, instead of "the supervisor" read "the board of directors".

(d)The internal auditor shall act in accordance with accepted professional standards and under the guidance of the audit committee, and shall report findings to the chairman of the board of directors, to the general manager, and to the chairman of the audit committee.

(e)The appointment of the internal auditor and the termination or suspension of his office shall be effected by the board of directors on the recommendation of the audit committee.

(f)The Supervisor may, after consulting the advisory committee, prescribe rules for the implementation of the provisions of this Section.

14f.§

(Repealed)

14g.§

(Repealed)

Financial Sanction§

14h.

(a)Where the Supervisor has reasonable grounds to believe that a banking corporation has done any of the following, the Supervisor may impose on it a financial sanction of one million new shekels:

(1)it violated a provision of the proper banking management directives;

(1a)it failed to comply with directives issued by the Supervisor for the correction of a defect or the prevention of harm pursuant to the provisions of section 8a;

(1b)it violated a directive issued by the Supervisor pursuant to the provision of section 8c(a);

(2)it violated a provision of the directives prescribed by the Governor by Order pursuant to section 13(a)(2);

(3)it violated a provision of the directives prescribed by the Governor pursuant to section 13b(c).

(b)Where the Supervisor has reasonable grounds to believe that a director was appointed or served in a banking corporation in contravention of the provisions of sections 11a1 or 11e, the Supervisor may impose on such director a financial sanction of NIS 60,000.

Reduced Financial Sanction§

14i.

(a)The Supervisor may not impose a financial sanction lower than the financial sanction prescribed in this Chapter, except pursuant to the provisions of subsection (b).

(b)The Governor, in consultation with the Minister of Justice, may prescribe categories of cases, circumstances and considerations by reason of which the Supervisor may impose a financial sanction lower than the financial sanction prescribed in section 14h, and at maximum rates of reduction to be prescribed by the Governor.

Continuing Contravention and Repeated Contravention§

14j.

(a)In the case of a continuing contravention, the financial sanction prescribed for that contravention shall be increased by an amount equal to one fiftieth thereof for each day during which the contravention continues.

(b)In the case of a repeated contravention, the financial sanction that could have been imposed in respect thereof had it been a first contravention shall be increased by an amount equal to one half of that financial sanction; for this purpose, "repeated contravention" – a contravention of a provision from among the provisions set out in section 14h, within two years of a prior contravention of the same provision in respect of which a financial sanction was imposed on the contravenor.

Demand for the Sanction§

14k.

A financial sanction shall be paid pursuant to a demand by the Supervisor, within thirty days from the date of its delivery; the demand shall be issued after notice has been given to the person to whom it is directed of the intention to issue it and such person has been given an opportunity to state his arguments; the notice referred to shall state that by reason of a continuing contravention the contravenor will be charged an additional financial sanction pursuant to the provisions of section 14j(a).

Shekel Interest and Default Charges§

14l.

If a financial sanction is not paid on time, shekel interest and default charges shall be added thereto for the period of default, until its payment, and the provisions of the Interest and Linkage Law shall apply with such modifications as are required.

Collection§

14m.

The financial sanction shall be collected for the State Treasury, and the Tax (Collection) Ordinance shall apply to its collection.

Publication of Imposition of a Financial Sanction§

14n.

Where a financial sanction has been imposed pursuant to section 14h, the Supervisor may direct the person liable for its payment to notify customers or to publish in a newspaper or in any other manner directed by the Supervisor, the fact of the imposition of the sanction, the name of the person liable for payment, the nature of the contravention in respect of which it was imposed and the circumstances thereof, and the amount of the sanction.

Appeal§

14o.

(a)A demand for payment of a financial sanction may be appealed before the Magistrate's Court in Jerusalem within thirty days from the date on which the demand was delivered.

(b)The filing of an appeal shall not operate to stay the payment of a financial sanction, unless the Supervisor has agreed thereto or the court has ordered otherwise.

(c)If the appeal is allowed, the amount paid shall be refunded together with shekel interest from the date of payment until the date of refund.

Penalties§

15.

(a)

(1)Any banking corporation that –

(a)wilfully fails to comply with the provisions of this Ordinance, or

(b)issues banknotes in the country or circulates or permits the circulation therein of banknotes issued by it or other banknotes whose issuance has not been authorised by the Government of Israel,

shall, upon application by the Attorney General submitted to the Registrar of Companies, have its name struck off the register of companies.

(2)Any person who is a manager or managing director of a banking corporation and who –

(a)fails to take all appropriate steps to ensure that the banking corporation complies with the requirements of this Ordinance, or

(b)fails to take all appropriate steps to ensure the accuracy of any report submitted in accordance with the provisions of this Ordinance,

shall, upon being found guilty, be liable for each offence to imprisonment of not more than two years or to a fine of not more than three hundred pounds or to both such penalties.

(b)A person who has violated a provision of section 11a, or who fails to provide information after having been required to provide it pursuant to the provisions of section 11b, or who has acted in contravention of the provisions of section 11c, shall be liable to imprisonment of one year or double the fine prescribed in section 61(a)(3) of the Penal Law, 5737-1977.

Confidentiality§

15a.

(a)A person shall not disclose information that was given to him nor show a document that was submitted to him pursuant to this Ordinance or pursuant to the Banking (Licensing) Law; however, disclosure of information is permitted if the Governor considers it necessary for the purposes of a criminal prosecution, or if the information or document was received from a banking corporation – with its consent.

(b)For the purpose of the disclosure of documents and information received pursuant to this Ordinance or pursuant to the Banking (Licensing) Law to a court, the Bank of Israel or the Supervisor and its employees shall have the same status as the State and its employees.

(c)A person who contravenes this Section or the provision of section 6(5) shall be liable to imprisonment of one year or a fine of 10,000 pounds.

Disclosure of Information to a Supervisory Authority in a Foreign State§

15a1.

(a)Notwithstanding the provisions of section 15a, the Supervisor may transmit information in his possession to a competent authority in a foreign state whose function is to supervise a branch of a banking corporation in that state, a banking institution incorporated in that state that is controlled by a banking corporation, or a foreign corporation that is a foreign bank operating in Israel or that controls a banking corporation.

(b)The Supervisor shall not transmit information pursuant to the provisions of subsection (a) unless satisfied that both of the following conditions have been met:

(1)the information was requested for the purpose of fulfilling the functions of the competent authority in supervising the stability of the branch, the banking institution or the foreign corporation, as referred to in subsection (a), as the case may be;

(2)the supervisory authority has confirmed that it is subject to a duty of confidentiality similar to the provisions of section 15a, or has undertaken not to transfer the information to another.

(c)The Supervisor shall not transmit information as aforesaid if it has been determined in relation thereto that it is liable to prejudice a pending investigation or the security of the State.

Disclosure of Information to a Supervisory Authority in Israel§

15a2.

(a)Notwithstanding the provisions of section 15a, the Supervisor may disclose information or show a document to an employee of the Bank of Israel, to the Financial Stability Committee as defined in the Bank of Israel Law, and also to the Securities Authority within its meaning in section 2 of the Securities Law, 5728-1968, to the Supervisor of Financial Service Providers appointed pursuant to the Financial Services Supervision Law (Regulated Financial Services), 5776-2016, or to the Commissioner of Capital Markets, Insurance and Savings within its meaning in the Financial Services Supervision Law (Insurance), 5741-1981 (in this Section – the transferee body), provided that the Supervisor is satisfied that the information or document is requested for the purpose of fulfilling the functions of the transferee body.

(b)A person shall not disclose information nor show a document that were transmitted to him pursuant to the provisions of this Section; a person who contravenes the provision of this subsection shall be liable to imprisonment of one year or a fine as referred to in section 15a(c).

Application of Provisions to Cooperative Societies§

15b.

In applying the provisions of this Ordinance to a cooperative society that is a banking corporation, the provisions shall apply with such modifications as are required by the matter, and in particular for this purpose –

(1)where reference is made to the board of directors, it shall be read as if reference were made to the "committee" within its meaning in the Cooperative Societies Ordinance;

(2)where reference is made to a member of the board of directors, a managing director with signing authority, or a treasurer, it shall be read as if reference were made to an "officer", within its meaning in the Cooperative Societies Ordinance;

(3)(Repealed)

Corporations Treated as a Banking Corporation§

15c.

(a)For the purposes of sections 5, 8a, 8c, 8o to 8u, 13, 13a, 14h(a)(1) and (2), and 14i to 14o, a corporation as referred to in sections 11(a)(3a) to (3c) and 11(b) of the Banking (Licensing) Law shall be treated as a banking corporation.

(b)For the purposes of sections 5, 8a, 8c, 8d1 to 8e1, 9 to 11a1, 12, 14b, 14c, 14e, 14h(a)(1), 14i to 14o, and 15 to 15a2, a holder of a stability payment services licence as defined in section 36i of the Banking (Licensing) Law and a corporation under its control shall be treated as a banking corporation; however, in relation to a corporation under the control of a holder of a stability payment services licence as aforesaid, the provisions of section 11a shall not apply.

Savings of Laws§

15c1.

The provisions of sections 8d1, 8d2 and 8e1 are in addition to the provisions of any law, including procedures and directives of the Supervisor.

Implementation§

15d.

The Governor is responsible for the implementation of this Ordinance.

Repeal§

16.

The Banking Ordinance, the Banks (Amendments and Additional Provisions) Ordinance, 1936, and the Banks (Amendments and Additional Provisions) Ordinance, 1937, are hereby repealed.

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OrdinanceCorporate & Business

פקודת הבנקאות, 1941

banking ordinance

banking law israel

pekudat habankaot

banking regulation 1941

israeli banking ordinance

banking statute

banking code israel

habankaot 1941

Banking Ordinance, 1941

Short Title§Cite ✦

Interpretation§Cite ✦

Restriction on Use of the Title "Bank"§Cite ✦

Names Liable to Mislead§Cite ✦

Supervisor of Banks and his Powers§Cite ✦

Establishment of an Advisory Committee§Cite ✦

Credit for the Purpose of Securing the Stability of a Banking Corporation§Cite ✦

Notice to a Banking Corporation of Defects§Cite ✦

Power of the Supervisor in Determining Bad Debts§Cite ✦

Measures to Prevent Harm§Cite ✦

Powers for the Preservation of the Stability of a Banking Corporation§Cite ✦

Reporting by a Banking Corporation of Embezzlement§Cite ✦

Report of the Supervisor§Cite ✦

Offence against the Provisions of Sections 8c and 8d§Cite ✦

Offence against the Provisions of Section 8d1§Cite ✦

Powers of an Authorised Administrator§Cite ✦

Special Supervisor§Cite ✦

The Management Committee§Cite ✦

Provision of Information§Cite ✦

Suspension of Fulfilment of Obligations§Cite ✦

Power to Guarantee§Cite ✦

Insolvency or Winding-Up Proceedings§Cite ✦

Restriction on Decisions of General Meeting of Shareholders§Cite ✦

Declaration of Cessation of Services§Cite ✦

Cancellation§Cite ✦

Postponement of Dates§Cite ✦

Interest and Linkage Differentials§Cite ✦

Execution of Payment Order§Cite ✦

Limitation of Liability of the Banking Corporation§Cite ✦

Defence under Criminal Law§Cite ✦

Submission of Reports to the Supervisor of Banks§Cite ✦

Presentation and Publication of Balance Sheet§Cite ✦

Persons Unfit to Participate in the Management of Banks§Cite ✦

Approval of Appointment of an Office Holder§Cite ✦

Prevention of Conflict of Interests§Cite ✦

Information from Shareholders§Cite ✦

Appointment, tenure and termination of tenure of directors in a banking corporation that is a public company§Cite ✦

Proposal of candidates for the office of director in a banking corporation without a controlling core§Cite ✦

Appointment, tenure and termination of tenure of directors in a banking corporation without a controlling core§Cite ✦

Annual fees§Cite ✦

Early repayment of a loan§Cite ✦

Joint account and joint safe-deposit box§Cite ✦

Dormant deposits§Cite ✦

Issue of banknotes§Cite ✦

Ratio between various items§Cite ✦

Offences by managers of the banking corporation§Cite ✦

Offences relating to entries in books§Cite ✦

Guarantee by a Banking Corporation for Bill Brokerage§Cite ✦

Internal Auditor§Cite ✦

Financial Sanction§Cite ✦

Reduced Financial Sanction§Cite ✦

Continuing Contravention and Repeated Contravention§Cite ✦

Demand for the Sanction§Cite ✦

Shekel Interest and Default Charges§Cite ✦

Collection§Cite ✦

Publication of Imposition of a Financial Sanction§Cite ✦

Appeal§Cite ✦

Penalties§Cite ✦

Confidentiality§Cite ✦

Disclosure of Information to a Supervisory Authority in a Foreign State§Cite ✦

Disclosure of Information to a Supervisory Authority in Israel§Cite ✦

Application of Provisions to Cooperative Societies§Cite ✦

Corporations Treated as a Banking Corporation§Cite ✦

Savings of Laws§Cite ✦

Implementation§Cite ✦

Repeal§Cite ✦

Short Title§

Interpretation§

Restriction on Use of the Title "Bank"§

Names Liable to Mislead§

Supervisor of Banks and his Powers§

Establishment of an Advisory Committee§

Credit for the Purpose of Securing the Stability of a Banking Corporation§

Notice to a Banking Corporation of Defects§

Power of the Supervisor in Determining Bad Debts§

Measures to Prevent Harm§

Powers for the Preservation of the Stability of a Banking Corporation§

Reporting by a Banking Corporation of Embezzlement§

Report of the Supervisor§

Offence against the Provisions of Sections 8c and 8d§

Offence against the Provisions of Section 8d1§

Powers of an Authorised Administrator§

Special Supervisor§

The Management Committee§

Provision of Information§

Suspension of Fulfilment of Obligations§

Power to Guarantee§

Insolvency or Winding-Up Proceedings§

Restriction on Decisions of General Meeting of Shareholders§

Declaration of Cessation of Services§

Cancellation§

Postponement of Dates§

Interest and Linkage Differentials§

Execution of Payment Order§

Limitation of Liability of the Banking Corporation§

Defence under Criminal Law§

Submission of Reports to the Supervisor of Banks§

Presentation and Publication of Balance Sheet§

Persons Unfit to Participate in the Management of Banks§

Approval of Appointment of an Office Holder§

Prevention of Conflict of Interests§

Information from Shareholders§

Appointment, tenure and termination of tenure of directors in a banking corporation that is a public company§

Proposal of candidates for the office of director in a banking corporation without a controlling core§

Appointment, tenure and termination of tenure of directors in a banking corporation without a controlling core§

Annual fees§

Early repayment of a loan§

Joint account and joint safe-deposit box§

Dormant deposits§

Issue of banknotes§

Ratio between various items§

Offences by managers of the banking corporation§

Offences relating to entries in books§

Guarantee by a Banking Corporation for Bill Brokerage§

Internal Auditor§

Financial Sanction§

Reduced Financial Sanction§

Continuing Contravention and Repeated Contravention§

Demand for the Sanction§

Shekel Interest and Default Charges§

Collection§

Publication of Imposition of a Financial Sanction§

Appeal§

Penalties§

Confidentiality§

Disclosure of Information to a Supervisory Authority in a Foreign State§

Disclosure of Information to a Supervisory Authority in Israel§

Application of Provisions to Cooperative Societies§

Corporations Treated as a Banking Corporation§

Savings of Laws§

Implementation§

Repeal§