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In a year full of failures, when the successful banker is the one who failed the least, the choice of Shlomo Piotrkowsky, chairman of the First International Bank of Israel (FIBI), as the banking system's man of the year is unavoidable. Not only because his failure was the most resounding of all, and not only because FIBI's losses were the largest among the five major banks, but mainly because FIBI's failure and that of Piotrkowsky, who heads the bank, offers numerous lessons regarding the structure of the banking system, the role of the medium-sized banks, their managers' dilemmas and the quality of the relationships between the controlling shareholders and the managers.

On the professional level, what happened to Piotrkowsky shows that there are no shortcuts in banking. The rapid enlargement of the bank's credit portfolio combined with the erosion of profit margins and a focus on a small number of big borrowers is a recipe for complications, especially when the economy is mired in a severe recession. These complications forced FIBI to make enormous provisions for doubtful debts, totaling NIS 708 million in the first nine months of 2002. The bank's ratio of provisions for doubtful debts for the first nine months was 1.9 percent, compared to an average of 0.85 percent at the four other major banks.

The second lesson to be drawn from Piotrkowsky's management concerns the tremendous importance of the contribution made by the bank's bread-and-butter clientele to its profits and competitiveness. Bank Hapoalim and Bank Leumi became no less embroiled than FIBI in affairs such as those of Gad Zeevi, Tevel and Peled-Givony, but the two larger banks managed to prevent losses, and will end the year with a profit, albeit a low one. The decisive contribution made by ordinary households to the banks' financial results was clarified this year beyond the shadow of a doubt, and the lesson is that if one does not have an army of little customers who contribute big profits, it is better not to gamble on financing big deals in which the borrower profits and the bank bears the risk.

The third lesson, and the most painful from the perspective of both Piotrkowsky and former board chair Yigal Arnon, is that the gratitude of controlling shareholders is fluid. As long as FIBI throve and flourished, Piotrkowsky was rewarded, esteemed and adored by the controlling shareholders like few others in the banking system. But from the moment the losses and the various imbroglios (mainly the Zeevi affair) were revealed, Piotrkowsky became persona non grata as far as Joseph and Moise Safra were concerned.