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The Knesset Finance Committee decided Tuesday that Bank Leumi can continue to own a 10% stake in Migdal Insurance, even though it owns substantial interests in three conglomerates, which is ostensibly against the rules.

Under the Banking Law, a bank may not own substantial holdings in more than one conglomerate.

Bank Leumi, which is controlled by the state itself, however owns stakes in Paz Oil and The Israel Corporation as well.

The Bank of Israel has however compiled an amendment to the Banking Law, under which Leumi would only have to sell one of the three holdings. It has already stated that of the three, it would prefer to sell its holdings in Paz. A Leumi representative told the committee that the bank will sell its holdings in Paz by the end of 2010, and will keep the Migdal shares.

The Finance committee has approved the central bank's draft, which means it can now be presented to Knesset for voting into law.

Knesset member Shelly Yachimovich (Labor) opposes the bill. She criticized the central bank for submitting a bill that throughout, applies only to Leumi.

"This is essentially a law for Bank Leumi, as this law is currently not relevant for any other bank," said Yachimovich, adding that the Brodet Commission determined that concentration of assets must be combated.

"It really bothers me that instead of fighting for the reduction of concentration," continued Yachimovich, "this bill does exactly the opposite, allowing even greater concentration." At a committee meeting on this matter two weeks ago, the committee's legal advisor Sagit Afik also criticized the bill, and advised the committee to ask the central bank to justify the bill and to clarify its ramifications on other banks.