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Liberalization of the banking sector

The 1996 Law No. CXI on the Issue of and Trading in Securities, the Stock Exchange and Investment Services (the Securities Law) entered into effect on January 1 1997. It regulates the different forms of investment services as well as the subject matter of these services (ie, securities, derivatives, etc) and sets forth the requirements to be met by an investment services company as regards its legal form under company law. In accordance with these provisions, investment services may be rendered by securities commission firms, securities trading houses and special investment firms, the scope of services they may offer depending on their legal form. Other market participants which do not have the status of such a securities commission firm, securities trading house or investment services firm are subject to various restrictions as regards the provision of investment services defined in the Securities Law.

For example, in the past banks were only allowed to trade in government securities and securities not sold on the open market. Apart from that, they were also allowed to engage in certain transactions involving derivatives, but they did not have the right to engage in normal securities commission transactions or in proprietary trading in stocks. For this reason many banks established investment services subsidiaries through which they transacted brokerage operations.

Pursuant to Law No. CLI, which was passed in 1997, the Securities Law was amended as of January 1 1999, to the effect that banks are now allowed to freely engage in investment services regulated under the Securities Law.

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