Continental Bank extended NIS 190 million, 75 percent of its equity, in credit to the Peled-Givony group, Ha'aretz has learned. Consequently, the bank will have to make extensive provisions for doubtful debt.
Continental Bank is jointly owned by Bank Hapoalim (63 percent) and the Sweden-European Bank SEB (37 percent), but in practice was run by Bank Hapoalim.
The Bank of Israel prohibits commercial banks from extending more than 30 percent of the bank's equity in loans to a single group. According to sources, Continental Bank did not formally violate this provision; the companies in the group were organized in a way that took advantage of loopholes in the language of the law.
According to the definitions of the central bank, a single group of debtors is one in which at least one of the debtors is a substantial guarantor for the other's loan; one in which each of the debtors owes the bank more than 5 percent of the bank's equity and in which the debtors are dependent on one another in the long run; or any other group that is declared as such.
Bank Hapoalim's spokesperson would not comment.
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