745.3
The Socio-Political Foundations of the Zionist Banking System in British Mandatory Palestine and Its Institutional Change in the Political Economy of Israel
In 1948, when Israel was established, there were more than twenty banks and a hundred of credit cooperatives. This was the legacy of the pre-state period in which this fragmented Jewish banking system was formed by the British liberal legal framework, social and business networks among German origin Jewish bankers, power struggles between the local political actors--while the Zionist ideology unites them all.
Thirty years later, in the end of the 1970s, the landscape of the Israeli banking was completely different: it was dominated by only three powerful banking groups which have become almost exclusive actors in the financial and 'real' markets. The government has decided to create a 'state-led' financial system (similar to France) and brought about an extreme consolidation in the banking sector, in order to control the monetary system and optimize the channeling of capital for achieving industrialization. Through ordinances and informal means, embedded in institutional arrangements, politicians and state bureaucrats adopted and simultaneously applied a triangular policy: giving institutional preference to three specific banks; imposing discrimination against the rest; and prompting mergers in the field. The regulatory authorities also allowed the three largest banks to become 'universal' (similar to Germany), what made the implementation of the government's developmental strategy easier and concurrently strengthened the banks' dominance in the political economy of Israel.
Therefore, due to the national historical context, political connections and social networks, the "big three" have become the state's loyal policy partners. And in return, they claimed and received a preferential status that served their business interests.