Fischer to depose Bank Hapoalim chairman if Shari Arison refuses

Relations between the Bank of Israel and one of the banks under its purview have fallen to a new low. The Bank of Israel still hopes that controlling shareholder Shari Arison will heed its call and oust chairman Danny Dankner herself. But if she doesn't, on Thursday central bank governor Stanley Fischer is expected to meet with her again, for a third meeting on the topic, and demand that chairman Dankner be fired with immediate effect.

If Arison still balks, Fischer is expected to take the extreme move of wielding his powers under Article 11 of the Banking Law, and arrange for Dankner's ouster himself.

In their previous two meetings, Fischer had urged Arison to show Dankner the door, citing problems with Hapoalim's performance since he took the job following the removal of former chairman Shlomo Nehama in March 2007.

Sources at the Bank of Israel surmise that Arison will heed the call, despite a statement of support for Dankner that she issued on Sunday.

The central bank's urgency is based on their sense that matters at Hapoalim are paralyzed, which could impair its stability.

On Sunday, Hapoalim's board of directors issued a statement, asking to urgently meet with the supervisor of banks at the Bank of Israel, Rony Hizkiyahu, following media reports on central bank concerns about the functioning of the board and its chairman.

At Sunday's meeting Hapoalim's board gave chairman Danny Dankner its full backing in response to the central bank call for his ouster. The bank has hired the services of attorney Ram Caspi to handle the issue, and he may also coordinate the meeting between Hizkiyahu and the board.

Bank of Israel management has been infuriated by media reports that Hizkiyahu may have personal motives for insisting on Dankner's departure, and for opposing the appointment of Zion Keinan as CEO in the stead of Zvi Ziv.

According to media reports, Hizkiyahu, who worked at Hapoalim for 18 years and rose to manager of the business center in the business division, unsuccessfully demanded a golden parachute when he left. Central bank sources say they suspect Hapoalim is behind these stories, which they dismiss.

For one thing, point out Bank of Israel sources, Hizkiyahu left the bank eight years ago, before either Dankner or Keinan had been in positions of power there.

If anything, it is Stanley Fischer himself behind the drive to oust Dankner, based on the central bank governor's estimation that the Hapoalim has suffered enough problems with Dankner in the driver's seat - nine crises, in fact.

Central bank managers are beating themselves up over the fact that they hadn't taken action against Dankner earlier, TheMarker has learned.

Reportedly, the central bank has no objection to Keinan's appointment as CEO. It was dismayed by the manner in which the board accepted Ziv's resignation as CEO, after less than three minutes' discussion of the sudden move, and at the same meeting crowned Keinan, without serious discussion of his suitability and without launching a search committee to find the best candidate.

The workers' union at Hapoalim has also sided with Dankner. Union chairman Charlie Amzaleg said last week that the bank's workers will fight tooth and nail for Dankner and Keinan, out of personal commitment to the bank.

Amzaleg called on Fischer to halt Hizkiyahu's "actions against Hapoalim's board," accusing Hizkiyahu of having personal motives and taking revenge. Amzaleg also wrote that Keinan is a capable manager who is sensitive to labor relations at the bank.

Sources claimed that the differences of opinion between Dankner and outgoing CEO Ziv, which lay behind Ziv's resignation, concerned the bank's streamlining plan and the layoffs it entailed. Dankner apparently opposed the plan, while Ziv supported it.

Both Dankner and Keinan are known for their good relations with the union, which has a reputation of being more easygoing than workers' groups at other banks.

And where do Caspi and Pini Rubin, Shari Arison's legal counsels, stand? Bank of Israel sources suspect they're playing both sides. In conversation with central bank officials, they state clear understanding that Dankner must resign, because the central bank has lost faith in him. But in conversations with Arison and Dankner, they counsel fighting to the end.

Possibly, surmise Bank of Israel officials, Caspi and Rubin just don't want be the ones to tell Dankner that he has to go. Rubin refused to comment for this report.