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Israel: Fischer takes on the family tycoons

Central bank governor says ownership concentration must change; Report warns of systemic risk

Bank of Israel Governor Stanley Fischer

Stanley Fischer: Israel needs to keep talented people in the country

Bank of Israel Governor Stanley Fischer has admitted new proposals to reduce ownership concentration in Israel’s private sector could discourage investment in the country.

A Bank of Israel report in May drew attention to the small number of family conglomerates in control of a relatively large proportion of Israel’s biggest companies. The report gave ideas on how to counter the groups’ sway.

One proposal was a tax on dividend transfers to deal with so-called pyramid-style structures of hierarchical interlocking ownership. Another suggestion to mitigate risks to the financial system was to force the separation of control of financial institutions from non-financial institutions.

In an interview with Euromoney on the sidelines of an Israel investor conference in London last month, Fischer says appropriate responses need to be considered. "This concentration of economic power is a feature of many small, open economies," he says. Asked whether he was worried about family groups taking money out of Israel, he says Israel must "bear in mind the law of unintended consequences".

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