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The titanic battle between Bank Hapoalim and its watchdog, the Bank of Israel, is nearing its end. Hapoalim chairman Danny Dankner traveled to Jerusalem yesterday to meet with Bank of Israel governor Stanley Fischer, who's been calling for Dankner's head over his purported failures in supervising Hapoalim's management.

Meanwhile, Hapoalim management and the central bank compromised over the composition of a search committee commissioned with locating a new chief executive for the bank. The committee will have three external directors and three representatives of Hapoalim controlling shareholder Shari Arison. Originally Hapoalim had insisted on a majority for Arison's people.

The committee is to recommend a successor for Zvi Ziv, the CEO who quit the day before Hapoalim filed a less-than-stellar report for 2008. It was the board's cursory discussion of Ziv's resignation, and the hasty choice - that same day - of Zion Keinan to replace him, that triggered the Bank of Israel's call for Dankner's resignation.

The panel will announce its choice by September 30, and may consider Keinan for the post despite the Bank of Israel voiding his appointment because of flaws in the nomination process.

The Bank of Israel has clarified that if Arison didn't fire Dankner, it would take steps to oust him.

Neither the central bank nor Hapoalim commented on yesterday's meeting.

The Bank of Israel has not explained why it wants Dankner gone. Sources near the bank claim the reason is a series of bad management decisions at Hapoalim over more than two years, since Dankner took over the board in the stead of Shlomo Nehama, whom Arison had fired.

Among the developments to which the Bank of Israel took exception was Hapoalim's dismissal of external director Amir Barnea, the attempt to appoint Arison crony Irit Izakson as vice chairman (because of flaws in the appointment process), and the appointment of Iris Dror to the board of directors despite her lack of education and experience in banking. Ultimately the central bank did approve Dror's appointment.

The Bank of Israel intervened in decision-making at Hapoalim on three occasions, one when it forced the bank to sell its portfolio of mortgage-backed securities, on which the bank had already lost $1.3 billion. It also stopped Hapoalim from buying banks in Turkey and Ukraine.