Most of the focus over the past year has been on the events of October 7 and the ensuing war. Not only the citizens, but also the legislative and regulatory authorities in Israel have been devoting most of their time to deal with these issues, and observed how economic entities adjusted to the new reality.
In addition, Several statutory arrangements and regulatory guidelines have been published so far this year, particularly in relation to the capital market, the financial sector and privacy protection.
With this update, we aim to ensure that business entities operating in the various markets are informed of the new directives—some of which have already come into effect, while others are expected to come into effect in the coming months—and take measures to ensure compliance.
The regulatory authorities’ activities will continue gaining momentum, inter alia, due to the obvious need to create certainty in relation to the changes planned for the rest of this year and next year.
The financial sector
There have been quite a few developments in the financial sector:
Payment services
The main reform thus far in 2024 is the inception of the Regulation of Payment and Payment Initiation Services Law, which prompted the Israel Securities Authority to formulate and enact a series of regulations pertaining to payment and payment initiation service-providers . At issue are provisions that affect new and existing players operating under other licenses – primarily financial asset service-providers, but also credit service-providers – that are being obligated to adapt their activities accordingly. The Capital Market Authority also revised its directives in order to include supervised entities that will engage in payment initiation services.
In order to promote the integration of payment service-providers into the market, the Bank of Israel is taking measures to ease the access to payment systems and assigning identification codes to payment service providers.
Sources of financing to small and medium-sized corporations
The Israel Securities Authority published a public appeal for insights from the market to assist it during its consideration of the need to expand and diversify financing channels for small and medium-sized corporations . Also, there have been recent developments in the Payment Initiation Services Law. Beyond that, the Ministerial Committee for Legislative Affairs recently approved the Securitization bill, the purpose of which is to develop the securitization market in Israel, to contribute to the financial system’s efficiency and stability, and to promote competition in the credit and capital markets in Israel.
Privacy protection
Regulatory amendments pertaining to privacy protection have also been enacted: the Knesset Constitution, Law and Justice Committee approved Amendment 13 to the Privacy Protection Law, which proposes extensive revisions in the law ; the Privacy Protection Authority published a draft opinion clarifying its position regarding transfers of personal data from Israel to other countries. In addition, the Ministry of Innovation, Science and Technology, in conjunction with the Ministry of Justice, published a policy document on the subject of regulation and ethics in the field of artificial intelligence, for the purposes of providing guidance to government ministries and regulatory authorities during their activities and presenting key ethical principles for the development, use and regulation of AI-driven systems.
Risk management and corporate governance
During the year the Capital Market, Insurance and Savings Authority issued a series of circulars and amendments to circulars dealing with proper management and corporate responsibility of service providers in the sectors of finance, credit, and more. Additionally, the Israeli Money Laundering and Terror Financing Prohibition Authority updated the lists of countries and jurisdictions at high risk of money laundering, terror financing and financing of proliferation according to the announcements by the international Financial Action Task Force.
Our Forecast
The payment services sector will continue to attract a lot of regulatory attention in order to ensure that regulation of this sector will produce the expected benefits, as well as attracting new players that will introduce innovative payment solutions. At the same time, regulation of key segments that, up until now, have been sidestepping the law using the exemption regulations – particularly the gift card segment, which the regulatory authority has declared is now under review – will be required.
Concurrently, the high interest rate and prevailing uncertainty necessitate, on the one hand, solutions for the financing needs of various entities and the promotion of regulation that will offer new financial instruments. On the other hand, problematic practices by various financial entities will require examination by the regulatory authorities and clarifications of directives in order to ensure that the public and the public funds are protected in a variety of investment channels.
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Barnea Jaffa Lande’s capital markets department and regulation practice are at your service.