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The Peled-Givony affair will continue to occupy the banking sector for some time and it appears that for least one of the banks that gave the credit - Continental Bank - the ramifications will go much further than just writing-off the bad debt.

Bank Hapoalim's Continental gave various Peled-Givony group companies and their financial advisor, Tal Jaegerman, loans worth NIS 190 million - amounting to 75 percent of its shareholder equity.

Bank supervision regulations forbid granting credit worth more than 30 percent of equity to a single borrowing entity. The Continental management that approved the credit claims it didn't breach the regulations because of the numerous companies and personalities involved in the Peled-Givony group, the group members' small stakes in each company, and the fact the companies were amassed in two distinct bunches.

What should have made the companies a single borrowing group in the eyes of the bank and possibly prevented the complications was simple fact that Jaegerman negotiated with the bank for the credit for all the companies. The bank's CEO at the time of the loans, Pinny Horev, and then-VP for credit, Amnon Lenir, apparently knew of this.

Credit of a certain scope must be approved by Continental's credit committee - a panel of directors. The committee is headed by Hapoalim's chief legal advisor, Channa Rosenberg. Amiram Sivan has been the chairman of Continental's board of directors since 1988.

According to a Bank Hapoalim audit report, Continental's management did not inform the credit committee of the connection between the various Peled-Givony companies, but instead brought each credit transaction to the committee for individual approval.

This does not absolve the committee members or the directors, headed by Sivan, of any responsibility. The board of directors' job is not to rubber stamp management recommendations, but to demand complete information on the loans, the inherent risks in granting credit and the key figures in the companies. Sivan served at the time as Bank Hapoalim CEO, and in that role, he did not approve credit for Peled-Givony's financial antics.

Along with Rosenberg and Sivan on the Continental board, sat Dan Halperin, a personal friend of Sivan and chairman of the board of Hayl, a company in the Peled-Givony group. It is likely Halperin could have provided the Continental board quality information on the Peled-Givony goings on. If he didn't, he violated his directorial duty. If he did, and the credit was granted anyway, the entire board violated its duty.

The affair is far from over, but apparently a few conclusions can already be reached. First, the Bank of Israel's single borrowing group limit is a spaghetti strainer with huge holes that let Peled-Givony sail right through. Perhaps the regulation needs to be re-examined.

Second, the managers of major banks serve as chairmen on the boards of smaller subsidiary banks. Sivan's case, like Galia Maor's case with the twice-implicated Leumi Switzerland, teaches us that even if they are talented managers, they are unable to pay the subsidiaries sufficient attention and hence get into trouble.