These engage in areas such as investment banking, including underwriting services and advising Israeli companies issuing shares or bonds abroad or prior to acquisitions or mergers, as well as brokerage services. There are various attitudes as to whether activity by foreign banks is preferable via a branch or via a subsidiary. From the supervision perspective, there are certain advantages to the former since a branch is supervised by another authority in the home country, and at least hypothetically the entire capital of the banking group is available to the branch. Some claim that this serves to make a subsidiary preferable to a branch, as a subsidiary is a stand-alone entity with its own capital. In practice, from a supervision point of view the distinction between the two types of entity is blurred, particularly in the case of large international banks or countries which have proper banking supervision on a consolidated basis, as experience has shown that a large bank, to maintain its reputation, will not abandon a subsidiary, and further, a comfort letter can be requested to establish the commitment on a formal basis.
Most Asian countries permit foreign banks to operate only via branches.
South Africa, on the other hand, Central Europe, and Latin America are more flexible and leave the decision to the foreign bank itself, and supervise both types of entity on an equal, consolidated basis. In Israel, a foreign bank can perform banking activities by establishing a branch or a subsidiary company. The Bank of Israel issues permits to open branches to large banks which have a high international rating and which meet the criteria described below. If a bank does not meet all the requirements for opening a branch, consideration is given to whether activity in Israel should be performed by a subsidiary. A permit granted to a foreign bank to establish either a branch or a banking subsidiary enables it to undertake activities in Israel under conditions similar to those applying to domestic banks.