Banking Supervisor Won’t Permit More Voluntary Departures at Bank Leumi

Leumi sought permission from the supervisor to increase the number of workers in the severance program from 700 to 1,000.

Bank Leumi in Tel Aviv.
Bloomberg

Bank Leumi has decided not to extend its staff voluntary departure program this year, following the central bank’s rejection of the terms it proposed.

The banking supervision department at the Bank of Israel and the Leumi workers’ committee previously agreed to the layoff of 700 employees under the program. However, in light of the wide response of employees seeking to take advantage of the program, Leumi sought permission from the supervisor to increase the number of workers in the severance program from 700 to 1,000.

The problem was that the bank wanted the costs of the severance program for the additional 300 workers to be attributed – from an accounting standpoint – to an “other comprehensive income” line item, rather than to the bank’s direct profit and loss statement, which would worsen the bank’s yield on capital rate.

The banking supervisor responded that Leumi could expand the voluntary layoff program, but the costs would have to be attributed to its regular profit and loss statement. That prompted the bank’s management to forgo any such move this year.

It is expected to enter new talks with the banking supervision department on further voluntary departures next year.

The estimated cost to the bank this year of 700 departures is 400 million shekels ($104 million,) Excluding an additional 150 million shekels in supplemental compensation negotiated by the workers’ committee for those workers who are subject to the collective bargaining agreement rather than working on personal employment contracts.

Departing employees will be getting up to 270% of the severance pay to which they would otherwise have been entitled. Five hundred of the departing employees will be employees with more expensive defined-benefit pension that are funded directly by the bank.