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"For four months I had sleepless nights over Industrial Development Bank. We saw the situation deteriorating but had no partner to work with. The treasury, which was supposed to be our partner in finding a solution, was indifferent. They simply did not care about the bank or the banking system," Supervisor of Banks Yitzhak Tal told Ha'aretz.

Tal, usually a reserved man, can no longer be silent. Since the crisis at Industrial Development started gaining momentum on August 21, Tal has become the punching bag of the treasury, which blames him for the bank's collapse; of politicians like Dalia Itzik, who knows her appointment of Ra'anan Cohen as bank chairman only accelerated its fall; and of Prime Minister Ariel Sharon, who is fed by the treasury. Tal has little to lose. His term is over within a few months, but he wants to walk out with dignity.

The State Comptroller's report, now in the making, may not be pleasant reading for Tal. Toward the end of the month, the governor of the Bank of Israel is to submit a report about Industrial Development Bank to the prime minister. Asked whether under these circumstances, after the collapse of Industrial Development and the embezzlement that crashed Trade Bank, he can go on working normally and supervise the other banks, in which most of the public's money is deposited, Tal said, "Naturally it is harder to do this job now, after these events. I am under attack and some of my time is devoted to meetings with the prime minister, the Finance Committee, the media. It certainly makes things harder. But we try to maintain our routine ... meet with bankers and do everything we would normally do ... We are aware that people might be mistaken and think that because we are barraged we would cut corners."

At least in one instance it turned out that you did: When Ra'anan Cohen was appointed chair of Industrial Development Bank - an appointment that probably would not have happened under normal circumstances.

"The story with Industrial Development Bank started when a jurist in the Prime Minister's Office asked me about appointing a chairman. I told her that while their license of other banks stipulates that the supervisor's approval is required for the appointment of chairman and CEO, the license of Industrial Development Bank includes no such provision. This is one of several small banks that received its license many years ago. I explained there was no formal duty but that I expected to be consulted ... I can only disqualify someone [in this case] after we see he is not doing a good job ... Nobody asked us about Ra'anan Cohen. The only choice we had was to overrule the prime minister and industry and trade minister over an appointee we know nothing about. This in effect would be telling the most senior ranks that we do not accept their decision."

But in the banking sector you are the most senior rank, you are the one in charge of the stability of the banks.

"We made it clear we wanted to be consulted, but once the decision had been made it seemed to me too extreme to come out against it. In any case, the bank's crisis was not caused by Ra'anan Cohen."

What caused it then?

"It was a series of events. We will submit a report about this to the prime minister. Most of it has already been published, although things were not given proper weight ... This bank has been profitable for years and was not classified as risky. One of the reasons was that we assumed it had a strong owner - the state. The problems started a little before mid-2002. We felt things were getting out of hand so at the end of May, we contacted the treasury and Government Companies Authority to find a solution. We thought that was the right thing to do because the accountant general [in the treasury] is in charge of government assets and the authority is in charge of the bank ... All kinds of solutions were brought up ... we thought it was the owner that had to choose, not us. In any case we explained time was of the essence ... We expected the government to make an effort to help the bank in the short term so that it can gain in the long run. But the treasury was unwilling to help the bank and was ready to risk a tenfold loss in the long run. It drove us crazy."

What impact does the collapse of Industrial Development Bank have on the banking system?

"The government used the bank as a channel to get money from foreign investors and this reflects badly on the government. The banking industry as a whole looks bad. The check is in our name, but it is also in the government's best interest to have a solid banking system."

Are you now expediting the handling of Israel Discount Bank's capital problems?

"I will not address the issue of Discount Bank, certainly not in the context of Industrial Development Bank, which is already half dead."

Did this affair change your perception about bank ownership?

"Without a doubt. All of my assumptions have collapsed. When we examine prospective buyers, we check their equity is double the buying price so that if we ever need to we can turn to them. The assumption is that owners will want to increase the investment to save the asset. The government can certainly do that, but the assumption was refuted ... In a meeting with the prime minister on August 21, I asked the treasury to tell the press that the state would back the bank. The treasury vetoed this."