The Bank of Israel, the country’s banking regulator, has ordered Bank Leumi to scrap its plans to buy a stake of up to 20% in the buyer of its credit card business.

Last month, Bank Leumi and Azrieli Group entered into an agreement to divest their credit card company Leumi Card to US private equity firm Warburg Pincus for NIS2.5bn ($685m).

Under the terms of the agreement, Bank Leumi’s wholly-owned subsidiary Leumi Partners has an option to buy shares in the corporation via which Warburg Pincus shall purchase Leumi Card.

Bank of Israel’s decision to block this buy back is to ensure healthy competition across the country’s banking sector.

“Despite the possibility that such a holding could create a commitment on the part of Leumi Group to the success of Leumi Card, the decisive consideration in the Bank of Israel’s decision is its desire to ensure the implementation of the purpose of the law, which is intended to create separate financial entities that will not hesitate to become a significant competitive factor,” the regulator said.

In February this year, the Bank of Israel issued a call for local and international entities to purchase the credit card companies of Bank Leumi and Bank Hapoalim in the country. The regulator ordered the banks to sell their credit card divisions by 2020 to improve competition in the industry.