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The supervisor of banks at the Bank of Israel, Roni Hizkiyahu, refuses to compromise and is posed to start taking formal action to oust Danny Dankner as chairman of Bank Hapoalim.

The regulator has no intention of accepting any compromise and is demanding Dankner's resignation from the bank.

Moreover, the regulator insists that Hapoalim retract the board's speed-of-light appointment last month of Zion Keinan to replace Zvi Ziv as chief executive of the bank. The Bank of Israel is insisting that a proper search committee be appointed to find the most suitable chief executive for Hapoalim, still the biggest bank in Israel.

The central bank is prepared to take on Hapoalim through the courts, if necessary.

In recent days there has been talk of a possible compromise between Hizkiyahu and Hapoalim. In one scenario Dankner would resign as bank chairman but resume his position as chairman of the bank's credit card subsidiary, Isracard. Alternatively, Dankner would resign but the banking supervisor would approve Keinan's appointment as Hapoalim's chief executive.

However, according to information obtained by TheMarker, Hizkiyahu will brook no compromise on the matter.

He will not approve Keinan as CEO unless he is selected by a search committee in strict accordance with Bank of Israel rules.

In particular, the regulator is insisting on Dankner's total resignation from the bank. That means Isracard, which is part of Hapoalim and thus subject to regulation by the supervisor of banks, is out of bounds to Dankner.

The office of the supervisor of banks sees Hapoalim's refusal to accept its authority regarding the appointment as a more general challenge to its authority.

If that challenge is not defeated, goes the theory, it could lead to banks refusing in the future to heed the regulatory body's directives on a variety of issues. The banks supervisor will thus insist that its demands vis-a-vis Hapoalim be met in full.

It is unprecedented for the banking supervisor to use its authority to oust a bank officer. If Hapoalim chooses to appeal its decision in the courts, that would create yet another precedent. The Bank of Israel is aware of this possibility, and is making preparations to defend its authority and judgment in the judicial system if necessary.

The brouhaha with the Bank of Israel erupted after the board of directors spent less than an hour discussing Zvi Ziv's resignation as CEO and the choice of Zion Keinan as his successor. Reportedly, the board spent less than three minutes talking about the circumstances that led by Ziv's resignation, namely his relations with Dankner.