Leumi Executive Named Israel's Banks Supervisor

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Hedva Ber. As the next banks supervisor, she will have to balance competing needs of competion and stability. Credit: Daniel Bar-On

Bank of Israel Governor Karnit Flug on Tuesday named Hedva Ber, a top Bank Leumi executive, as the next banks supervisor

Hedva Ber will take over as Israel’s chief banking regulator in July, the central bank said.

Bar, 47, will replace David Zaken, who said in February he would step down in June after four and half years on the job. She will be starting as the government weighs measures to increase competition in lending and financial services: On June 4 the Finance Ministry and Bank of Israel appointed a committee to review the issue, giving it three months to make recommendations.

Finance Minister Moshe Kahlon has promised to boost competition in the banking sector, including by requiring banks to spin off their credit-card business and encouraging loans to individuals and small businesses.

Flug agreed to the panel despite the Bank of Israel’s worry that increased competition could weaken the country’s commercial banks and jeopardize depositors’ savings. Flug signaled as much on Tuesday in her remarks on Ber’s appointment, that gave “competition” as the last of three goals for the new banks supervisor.

“The public good requires profession and careful supervision of the banking system both from the perspective of the public’s savings and deposits and ensuring the stability of the banking system and from the perspective of increased competition and fairness,” Flug said.

Israel’s big three banks — Leumi, Bank Hapoalim and Israel Discount Bank — account for some 70% of all bank assets in Israel, and most of the rest is controlled by the next two largest lenders. Efforts to introduce more competition by enticing foreign banks to enter the market or encouraging the establishment of credit unions have largely failed.

On top of competition and banking sector stability, Ber’s third big challenge is likely to be the issue of ownership and control of the banks.

Three of the banks — Hapoalim, Mizrahi Tefahot Bank and First International Bank of Israel — have controlling shareholders. That follows the model the Bank of Israel has traditionally preferred, but with policymakers concerned about conflicts of interest and cross-holdings between the financial and nonfinancial sectors, it has become harder to maintain.

Leumi and Israel Discount do not have controlling shareholders. Whether that model will work better has yet to be shown as neither bank has been operating under the structure for very long.

Ber has over 20 years’ experience in banking and risk management. She began her career as an economist in the Bank of Israel’s banking supervision department and as the bank’s representative on the board of the European Bank for Reconstruction and Development.

Ber left for the private sector in 2008, and was hired as deputy head of the capital markets division and risk manager at Leumi. Two years later she was appointed first executive vice president and head of the risk management division.

Because of her job as Leumi, Ber is expected to recuse herself from any issues relating to the bank for her first year, as well as from some issues involving Hapoalim and Mizrahi, both of which are being investigated by U.S. authorities for helping American clients evade U.S. taxes. Leumi settled similar accusation in December and paid a $400 million penalty.

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