Banks Ignoring Messages, Continuing to Name Big Business Reps to Their Boards

In the last two months three people working for the IDB group have been named to bank boards.

The recommendations of the so-called economic concentration committee notwithstanding, banks are continuing to appoint representatives of their biggest borrowers to their boards.

The committee had pointed out that fulfilling an executive role at a major non-finance company while sitting on the board of directors that lends that company money creates fertile grounds for conflicted interests. The committee therefore urged that the practice be banned.

It is true that the recommendations have yet to be enacted into law. Also, once they are, banks will have two years to comply. But the message from the recommendations is clear as day - especially given that the committee recommended criminal prosecution of people working at a non-finance company and sitting on a bank board in parallel.

One key fear behind the ban is that a business representative on a bank's board learns information through the bank about rival companies. There is also a concern that such a representative could press for denying loans to competing firms.

Beyond the messages arising from recommendations, David Zaken, the supervisor of banks at the Bank of Israel, is taking action to prevent such conflicting situations. For instance he forced Irit Izakson, a director at Bank Hapoalim (and representative of Hapoalim's controlling shareholder, Shari Arison ), to quit her parallel directorship at IDB Development - a member of one of Hapoalim's biggest borrowing groups.

But that hasn't discouraged the banks, it would seem. In the last two months three people working for the IDB group have been named to bank boards.

Discount Bank appointed David Levinson, who's also a public director at IDB group company Bayside and a public director at investment house Excellence Nessuah. That's a brokerage belonging to Yitzhak Tshuva - controller of giant borrower Delek Group.

Discount also hired Idit Lusky as a public director. She also sits on the boards of communications companies Cellcom and Netvision, both of which belong to the IDB group.

Mizrahi-Tefahot Bank appointed Sabina Biran to its board. She also sits on the board at supermarket chain Super-Sol, an IDB group company.

In addition, First International Bank of Israel hired Noga Yatziv to its board. She is also a director at food manufacturer Tnuva and at Granite Hacarmel.