• Enhanced Cooperation between the Banking Supervision in the Bank of Israel and the Banking Supervisory Authorities in the United States
  • September 16, 2011 | Authors: Barbara T. Kaplan; Yoram Keinan
  • Law Firm: Greenberg Traurig, LLP - New York Office
  • In a press release dated August 30, 2011 (the “Press Release”), the Governor of the Bank of Israel, Prof. Stanley Fischer, confirmed that the Supervisor of Banks at the Bank of Israel and the supervisory authorities in the United States (the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation), signed a Statement of Cooperation among them on August 28, 2011 (the “Statement of Cooperation”).

    In general, the Bank of Israel supervises the Israeli banks through the Supervisor of Banks. The Supervisor of Banks is appointed by the Governor of the Bank of Israel, and his tasks and authority are based on several Israeli domestic laws, including (i) the Banking Ordinance of 1941 (as amended); (ii) the Banking (Licensing) Law, 5741-1981; (iii) the Banking (Service to Customers) Law, 5741-1981; and (iv) the Checks Without Cover Law, 5741-1981.

    Two committees assist the Supervisor in his role of supervision. The Licenses Committee advises the Governor and the Supervisor on the issuance of licenses for the establishment of a banking corporation, the acquisition of a controlling interest in a bank, and the licensing of bank branches. The Licenses Committee also advises in cases where legal steps are being considered to ensure the stability of a bank where mismanagement has been found. The Advisory Committee assists on matters related to banking business and is consulted by the Supervisor of Banks on the issuance of new Proper Conduct of Banking Business Regulations.

    As set forth in the Press Release, the intended purpose of the Statement of Cooperation is to formalize and strengthen the cooperation between the Supervisor of Banks in Israel and the supervisory authorities in the United States. The stated focus of the Statement of Cooperation are banks incorporated in both Israel and the United States in the conduct of cross-border activity. According to the Press Release, the Statement of Cooperation reflects a commitment by the relevant supervisory authorities in Israel and the United States to the principles of consolidated supervision and cooperation among banking regulators. Importantly, the Statement of Cooperation establishes an improved mechanism that would allow for transfer of information between the regulators of banks in the two countries with respect to cross-border banking activity. The Statement of Cooperation specifically calls for enhanced sharing of information about banks that are under common ownership or control.

    Another stated purpose of the Statement of Corporation is to regulate the cooperation in the supervisory processes carried out by each of the authorities that signed the Statement, including activities related to (i) planned inspections of cross-border establishments, (ii) identification of suspected money-laundering activity or the financing of terrorism, and (iii) banking activity without a permit.

    The Press Release quotes the Israeli Supervisor of Banks, Mr. David Zaken, who said that “[t]he arrangements set out in the Statement of Cooperation are expected to boost cooperation with the US authorities with regard to the supervision of Israeli overseas banking offices operating in the US and the overseas offices of US banks operating in Israel.”

    The implications of this agreement are not presently known, although it can reasonably be foreseen that with greater banking cooperation between the U.S. and Israel, more information about depositors and their banking transactions will be exchanged. This should aid in law enforcement investigations of various types, such as money laundering, tax, and terrorism, at the very least.