Dear Colleagues and friends,

We would like to bring to your attention that a few days ago, the Ministry of Finance has published for public review and comments a proposed amendment to the Supervision of Financial Services (Regulated Financial Services) Law, 2016 (the “Memorandum” and the “Law“, respectively). Comments can be submitted until 21^st of September, 2023.

The main purpose of the Memorandum is to allow non-Israeli (foreign) entities providing certain Financial Services under the Law (Provision of Credit, Financial Asset Services and Operation of online Intermediary Credit System), to apply for a local license while benefitting from exemptions from certain provisions of the Law. This is provided that the Supervisor of Financial Service Providers (the “Supervisor“) is convinced that the foreign law regulating the foreign service provider, provides sufficient protection for the customers and subject to specific conditions specified in the licensee’s license.

Accordingly, it is proposed that the Supervisor shall be authorized to exempt such foreign service providers from certain provisions of the Law concerning pre-conditions for granting licenses, corporate governance and control and holding permits in licensees. The exemptions for foreign license applicants shall be published in the Supervisor’s registrar.

It is also clarified in the explanatory notes to the Memorandum that the above authorization does not derogate from the Supervisor’s authority under the Law to set provisions applicable specifically to foreign service providers.

The proposed amendment aligns with a similar regulation established under the Regulation of Payment and Payment Initiation Services Law, 2023, and the Financial Information Service Law, 2021.
To read our client update regarding the enactment of the Regulation of Payment and Payment Initiation Services Law >> click here

In addition, the Memorandum stipulates additional amendments to the Law, including:

1. Cancellation of the limitation concerning the engagement of Credit Providers and Operators of online Intermediary Credit Systems with borrowers between the ages of 18 and 21.
2. Amendment to the wording of the required disclosure provided to borrowers, so that it would be aligned with the equivalent disclosure provided by banks in the same context.
3. Clarifying that the licensing requirements for for the provision of Financial Asset Services or Credit do not apply to charitable institutions that provide interest-free deposit and credit services (“Gemach”), in light of a specific regulation applicable to these institutions.
4. Clarifying that the Supervisor`s authority to establish additional capital requirements does not derive from the definition of “Capital” in the Law. This clarification is intended to allow flexibility and a broader authority to the Supervisor to set instructions regarding additional capital as well as the manner of its safekeeping.

To view the Hebrew Memorandum >> click here

Our firm has extensive expertise and vast experience in the fields of financial services in all their aspects. We monitor and follow all regulatory developments in these areas, assisting and advising leading financial entities in Israel and around the world, whether it is ad hoc or regular advice, providing opinions on complex issues, inquiries to regulators and more.

We will be happy to be at your disposal and assist with any issue in these areas, including in connection with the above publication and the remarks and comments regarding it, as well as any questions or clarifications

 
Sincerely,
Herzog Fox & Neeman