Promoting the legislation will allow non-bank lenders to reduce credit to small and medium-sized businesses and households. In addition to a significant step to increase competition and promote technology in financial services in Israel
The Ministerial Committee for Legislation today (Sunday) approved two laws submitted by the Minister of Finance, Israel Katz, that will assist the business conduct of financial entities in Israel.
An amendment to the Banking Law will allow the expansion of sources of financing for non-bank lenders
Promoting the legislation will allow non-bank lenders to reduce credit to small and medium-sized businesses and households.
The credit market for households and small and medium-sized businesses in Israel is a highly centralized market that is almost completely controlled by the banks. One of the main reasons for this is that the sources of funding of banks today are cheaper than the sources of funding of non-bank lenders.
The amendment will allow lenders to diversify and expand the sources of financing for the purpose of providing credit and thus it may lower financing costs and allow these entities to compete in the banking system.
The draft law will allow large non-bank lenders, which comply with the provisions of the law, to increase the debt collection ceiling through commitment certificates from NIS 5 billion to NIS 15 billion and also raise debt through commercial securities within the limits set by law. This will allow lenders to significantly increase their cheaper sources of financing and reduce dependence on the banking system.
In addition, various restrictions will be removed regarding the collection of promissory notes from all non-bank credit providers. These restrictions limited the scope of business conduct of non-bank lenders and in effect prevented some of them from raising debt through promissory notes.
The bill to encourage the development of financial technology in Israel (the “Sandbox Law”), will help fintech companies operate in Israel and will lead to improved financial regulation in Israel
The bill is intended to enable the establishment of a unique program – “Regulatory Sandbox”, and will constitute a significant step in increasing competition and advancing technology in financial services in Israel.
The proposed plan is based on the conclusions of an inter-ministerial team coordinated by the Ministry of Justice and the Ministry of Finance and included representatives from the Securities Authority, the Bank of Israel, the Capital Market Authority, the Anti-Money Laundering and Terrorist Financing Authority and the Tax Authority.
The program establishes an innovative “experimental environment” in Israel in cooperation with all financial regulators in Israel to support the activities of advanced technological financial entities (fintechs) in Israel.
The “regulatory playground” will allow regulators to give regulatory relief to companies participating in the program while hedging risks, thus making it easier for fintech companies to try their innovative products in the Israeli market and benefit consumers. In addition, each company participating in the program will be accompanied by the financial supervisory authorities, in order to examine the program’s contribution to the company’s activities.
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