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The decision has been made. It was unanimous.

All the members of the team headed by treasury director-general Yossi Bachar to discuss capital market reform concurred: the banks must be forced to sell their holdings in provident funds, mutual funds, underwriting companies, and training funds, and relinquish management of these as well.

Whether because of the deafening public outcry, the private bill by Knesset member Yitzhak Cohen of Shas, or the general spirit of reform wafting from the finance minister's offices, what's sure is that the team saw a rare window of opportunity and jumped through.

Now two questions remain: who will buy the funds from the banks, and who must be prohibited from buying?

Actually, there is a third question: what delaying tactics will the horrified banks manage to implant in the Bachar recommendations in order to emasculate the entire reform?

Before addressing these questions, we should revisit the glaringly obvious - why the banks should be forced out of the funds and underwriting firms. After all, throughout the whole world, banks engage in the full range of financial services. Why should Israel divorce commercial banking and asset management?

Here are a few reasons.

1. In Israel, practically no sources of financing are available outside the banks - bonds, shares, mortgage-backed bonds, commercial paper, private equity and all that. Companies get almost all their financing - debt and capital - from the banks, both for the short term and the long. Elsewhere banks finance 10 percent to 50 percent of the activity and few grant long-term loans.

Israel needs sources outside the banks to improve the capital market, to lower prices and to allow firms and people to realize their full potential, while reducing their dependence on the banks. That dependence is bad not only for the companies but for the economy as a whole, as we saw two years ago when doubts arose regarding the sturdiness of the banks, and the Bank of Israel governor warned that the collapse of a major Israeli bank was not impossible.

One of the main reasons the American economy didn't fall apart after the Wall Street crash in 2000 was that its capital market is highly diversified. If the banks had been the main source of financing for corporate America, the crash could have triggered a crushing financial crisis that would have led to a tidal wave of bankruptcies among the banks. It did not happen in the U.S. or in Europe, but in Israel we teetered on the brink.

The only way to effectively develop a financial market beyond the banks is to separate them from their provident funds and mutuals, and to usher the nationalized pension funds into the right hands. As long as the banks retain control over the lion's share of the public's assets, nobody will have a motive or the ability to develop a financial market outside their scope.

2. As long as the banks retain control over the provident funds and mutuals, norms and culture of asset management stand little chance of developing in Israel's capital market.

Since most of the customers of the provident funds and mutuals are "captive audience" ones, the banks don't have to strain to achieve respectable yields. Thus for the last 20 years the banks' funds have underperformed, yet continue to control 90 percent of the assets. Clearly the winning model for the banks is to invest in marketing and distribution, not in the management of the money itself.

The only way to create a financial system with a better culture and norms of managing the public's money - a system in which the ones presenting the highest yields get most of the money to handle, a system in which underperformers have to leave the stage - is major structural reform, such as severing the funds from the banks.

3. Forcing the banks and their funds to part ways would reduce the domination of the market by a handful of people. Only 20 or maybe 30 wield the real power at present, including Shlomo Nehama, Danny Dankner, Zvi Ziv, Eitan Raff, Galia Maor, Arie Mientkavich, Giora Offer, Nochi Dankner, Avigdor Kaplan, Yair Hamburger, Kochi Ben Gera, Yaakov Shahar, Aharon Fogel, Zadik Bino, and David Granot.

They don't make the hands-on day-to-day decisions, because there are "Chinese walls" separating them from the money managers and they all come armed with a battalion of external directors. But at the end of the day the underlying echelons know exactly what is expected of them.

Oh, and there is a fourth reason - the conflict of interest. That is the lesser reason - and put your eyebrow back down. Yes, the conflict of interest are a disgrace, but the harm they cause to customers isn't the main reason to get the banks' hands off the funds. The main reason is to create an advanced system for the management of the people's money, to create a new structure for the capital market - one with less banks and more financing options and more freedom of choice for corporate Israel.

Now that we have understood just why the provident funds and mutuals must be cut off from their parent banks, it becomes clear who the best buyers would be: international companies that specialize in managing money, companies who survive solely by virtue of the quality of their service.

But would they want to buy these funds from the banks? Possibly. It depends how well the Finance Ministry does in creating conditions for the international firms to compete in the Israeli market, where the banks control 70 percent of the financial arena. And it mainly depends on the capital market reform, and the way it is marketed to the world. And for that, we have the right finance minister.