The Bank of Israel is apparently acting to limit Shari Arison's control over Bank Hapoalim. The central bank intends to place several restrictions on Arison as part of the conditions for granting her request to buy the complete controlling shareholding in Israel's largest bank.

The proposed limitations were raised a few weeks ago, but their importance was underscored by Arison's removal of bank chairman Shlomo Nehama, which was seen as a spur-of-the-moment decision by an unfettered controlling owner. 
   
Arison has been negotiating with the Supervisor of Banks, Rony Hizkiyahu, to purchase sole control of Hapoalim. Until recently the controlling interest - defined as 20% of the bank's shares - was divided between Arison with 11.5% of the bank, her American partners with 5.5%, and the Dankner family's Israel Salt Industries with 3%.

A few months ago the American group agreed to sell its share to Arison, and she received approval from the supervisor. At the beginning of this year, she also agreed with the Dankners on the sale of their 3%, the remainder of the controlling interest. The present approval process is related to this holding.

The purpose of the restrictions on Arison is to ensure that there are still checks and balances on Arison's control. For such restraints to be effective, the Bank of Israel intends to increase the power of the independent directors versus Arison. Among other proposals, the central bank's new limitations will prevent Arison from replacing all the directors in any given year, and she will be allowed to replace only a specific number each year.

Another requirement will be to change the composition of the board, and the number of outside, independent directors will rise from four to seven - almost half the board's 15 members. The outside directors are chosen by a committee, though the controlling owner recommends the candidates. The independent directors are intended to serve the interests of other shareholders, which in the case of Hapoalim means the general public.

The Bank of Israel also wants to require Bank Hapoalim to increase its reporting so that a closer eye can be kept on the goings-on at the bank. The central bank would be able to make sure that decisions are not made unreasonably, or not in the shareholders' interest.