A historic decision will be made next week. The Bank of Israel will announce whether it will let the Cerberus-Gabriel consortium buy a true controlling interest in Bank Leumi.
If it does, it is the final deal in the long process of re-privatizing Israel's banks, after their forced nationalization in the early 1980s as their shares collapsed.
As early as November 2005 a tender was issued for the bank's sale, and it was won by Cerberus-Gabriel. The consortium offered to pay NIS 4.62 billion for a controlling stake of 20% in the bank - a very high price indeed.
But the consortium failed to close the deal because the Bank of Israel did not approve its becoming a controlling partner.
The decision will now be made by the Bank of Israel Governor, Professor Stanley Fischer, who has said in internal meetings that this is one of the most difficult decisions he has been asked to make.
At those same meetings, Rony Hizkiyahu, the new Supervisor of Banks, said that he wished the problem with the New York branch of Bank Leumi were resolved because then there would be no obstacle to selling the bank to the consortium. Indeed, this is the only problem that is keeping Cerberus-Gabriel from Bank Leumi, the subsidiary in New York.
Under American law, the Cerberus-Gabriel consortium cannot own the New York bank because it is invested in non-financial sectors. According to American rules, it is forbidden to own industrial and real estate holdings as well as a bank - out of concern for possible conflict of interest.
During those same internal meetings at the Bank of Israel a number of proposals were put forth for a solution to the problem. For example, to sell Leumi New York, and in its place set up a financial entity that could offer business loans but not be able to accept deposits or offer retail banking services. The problem is that such a financial firm will not operate under the supervision of the Federal Reserve (because it is not a bank). As for Israeli supervision, it will not be easy to keep an eye on a company that is situated so far away.
But it is important to take into account the quality of the individuals we are talking about. Fischer believes in them. During the internal meetings of the bank he said that these are wealthy, experienced and respected businessmen with an excellent reputation. In addition, half of the controlling stake will be held by six Jewish financiers, none of whom wants to endanger his personal money in some adventure.
Fischer was particularly impressed with Ezra Mirkin, the head of the Gabriel fund. Mirkin wants very much to invest in Israel and has an excellent reputation. He will not wish to risk his good reputation in any way.
This is a group of sophisticated people who wish to turn Bank Leumi into a central player in world banking. They want to extricate the bank from its local swamp toward international financial activity in the broader world. And this is a group with the business connections, the financial capability and the management skills to link the bank to huge deals throughout the world.
But there are those who are actively working to stop the sale. There are business people who receive generous credit from Bank Leumi, and they do not want any change in ownership. There are those in the bank's management who want to continue along the current path with the current management. T
here is Shlomo Eliyahu, who holds 10% of the bank's stock and wishes to have a controlling stake. There are Nochi Dankner and Lev Leviev, who tried but failed to acquire the bank at the tender held in 2005.
On this point lies the main advantage of the Cerberus-Gabriel consortium - the partners are completely new to the Israeli economy. They are nobody's friends and their entry into the market will encourage decentralization and competition in the economy - and this is for the better.
Therefore, whoever disqualifies the deal will harm the Israeli economy. Because in the real world, there is no perfect deal. There is always some problem. Except in this case it's a small problem that can be solved. It's a peripheral problem compared with the significance of the overall deal.
The fact that such a respectable group chooses to invest in Israel, and includes six of the wealthiest Jews in the world who are willing to bring their own money to the deal, is an extraordinary expression of confidence in the Israeli economy, which is already making a name throughout the world. Many others will follow them, and the beneficiary will be the Israeli economy.
They are not asking for red carpet treatment or tax breaks. They only want to invest their money here, and it is therefore appropriate for Fischer to allow them to do so - for the benefit of banking and the economy.