"I am leaving three key jobs - director-general of the Labor Party, minister without portfolio and the person in charge of the Broadcasting Authority - in favor of the private sector," Ra'anan Cohen told Yedioth Aharonoth on Friday in response to Minister Dalia Itzik's intention to appoint him chairman of the board of the Industrial Bank of Israel.
If in the "private sector" Cohen was referring to this chairmanship, there is serious reason to suspect he has no idea what he is talking about. Although at this point, before his appointment was approved, he cannot be expected to know that the bank cannot extend any more credit, because it does not have sufficient capital, but the matter of defining the bank as part of the private sector should be set straight.
The Industrial Bank is the least private of all 30 banks that operate in Israel. For years now it has been the playing ground for politicians who have been manipulating it at will. It is a sheer miracle that it has survived. There are at least five indications that no bank in Israel is more governmental than the Industrial Bank:
Firstly, any bank in which a veteran politician and the master of political appointments, Dalia Itzik, appoints the chair, cannot under any circumstances be considered private. Instead of privatizing the bank, Itzik is keeping it as a platform for rubbing shoulders with the banking sector, big clients and labor unions. To her it is not a financial bank but a target bank.
Secondly, a bank in which the outgoing chair, Shlomo Borochov, is eighth on Yisrael b'Aliya's list and got his appointment as chair by former industry and trade minister Natan Sharansky, surely cannot be seen as private.
Thirdly, half of the bank's stock is owned by the state and the other half by the three large banks, Hapoalim, Leumi and Discount. Since the latter two are also controlled by the government, this makes the state the majority shareholder of the bank. So what exactly is it that is private about this bank?
Fourth, although it may be a bank by name, in reality the Industrial Development Bank is no more than a channel for extending government loans. If Cohen had a chance to look at the bank's balance sheets, he must have seen that half of the credit extended by the bank, NIS 13.5 billion, was given to the Israel Electric Corporation out of the state coffers, with the bank only serving as broker. The designated chair probably also noticed that the mix of the bank's balance sheet is alarmingly reminiscent of that of other banks in the `60s and `70s, when most of the business came from the state. Of the NIS 12.5 billion in deposits that the bank has, NIS 7.5 billion are government deposits. In addition, most of the bank's equity - NIS 676 million - was provided by the state.
Fifth, Labor's resigning director-general and the up and coming banker has probably been following the demise of Trade Bank - an entirely private bank, by the way - up close. This affair must have taught him that banks in Israel are only private until they collapse, at which time they become pubic, because the government has no choice but to cover the cost of the negligence and corruption that took place at this tiny bank. In the case of Trade Bank, this corruption even had nothing to do with politics.
What does this mean for the Industrial Development Bank? The large commercial banks express their conclusions in bank lingo: they will not extend the bank any liquidity. Letting a politician who has no banking experience run the bank is one thing, but giving him liquidity? No way! Let him ask Dalia Itzik.
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