The Bank of Israel has published a draft directive to enable all banks to buy back their own securities, subject to certain conditions.
The directive, called Proper Conduct of Banking Business Directive no. 332 ‘Buybacks by banking corporations’, will allow the banks to purchase the equities it issued thereby enabling it to increase its stake in the company.
Supervisor of Banks Dr Hedva Ber said: “We decided to update the Banking Supervision Department’s Directive on the issue after banks in Israel reached, and even surpassed, the capital targets we had set, and in view of share buybacks by banks being accepted worldwide.
“We are aware that numerous investors see great importance in a company having the option to buy back its shares, as an alternative to distributing a dividend.
“Against the background of the change, banks will be able to use their profits in a more wide-ranging manner—to extend credit and expand activity, to distribute a divided or to buy back shares.”
The new directive issued by Bank of Israel allows the banks to acquire up to 5% of its issued and paid share capital following the approval by the Supervisor of Banks.
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Further, the directive requires the purchase plan to be approved by the bank’s board of directors and it will not be directed to a specific shareholder group.
The bank are also required to complete the process within the scope of Israel Securities Authority’s safe harbor protection mechanism.