Thousands of worried Israelis have been following the troubles of Trade Bank - a small concern swamped by a NIS 250 million embezzlement. On Friday the Bank of Israel closed it for ten days.
Many rang their banks to ask "could I lose my money?" Those unsatisfied by the assured reply ("Of course not!") began to think of withdrawing their money. Trade Bank customers unable to get at their accounts began to take legal action to retrieve their money.
The governor of the Bank of Israel, David Klein said at the weekend that given Israel's experience in such matters, it was reasonable to assume the state would not allow Trade Bank customers to suffer. He praised Banking Supervisor Yitzhak Tal for his work on the matter and yesterday evening Klein said he would be seeking state guarantees for the public's accounts at Trade Bank. The guarantees would exclude any deposits found to be connected with the NIS 250 million embezzlement or belonging to controling shareholders of the bank.
The embezzlement involves sums that are four times the bank's equity and apparently had been going on for five years, according to the confessions of the bank's assistant investment director Esther Alon last week. Three days into a Bank of Israel inquiry into unusually large deficits at Trade Bank, Alon admitted having used fictitious accounts to help pay off her brother's debts in the gray market that he ran up with a gambling addiction.
Tel Aviv Magistrate Court extended the arrest of two suspects in the case by a further five days. Hannah Hasson and Shlomo Basson are suspected of opening the accounts into which the embezzled millions were redirected. Alon's brother Ofer Maksimov is still at large and is thought to have left the country.
In a move to increase intra-bank liquidity, the central bank raised the bank's monetary quotas from NIS 100 million to NIS 1 billion yesterday. This may help to improve liquidity problems between banks, but it fails on two other matters - what are Trade Bank clients supposed to do in the meantime, and despite all the banking supervision and auditing could something like this happen?
One Trade Bank customer yesterday appealed to Tel Aviv District Court to liquidate the company and appoint a receiver for the bank. The petitioner argued that a receiver would be far better able to help the bank's customers than David Tadmor, a former antitrust commissioner, whom Banks Supervisor Yitzhak Tal has appointed as Trade Bank's temporary manager. The court rejected the request.
Ben Zion Citrin added to this report.
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