The Letter and the Law

The governor of the Bank of Israel, Stanley Fischer, is in Singapore at the International Monetary Fund's annual conference. But rumors travel far and fast; in the time of his short junket, they crossed the Indian Ocean all the way from Tel Aviv, and back.

And the rumor was that Nochi Dankner received prior approval in principle from Fischer to buy part of the controlling interest in Bank Hapoalim.

The rumors are not to Fischer's taste, and the central bank has hurried to quash them.

"There was no preliminary contact with the governor over the deal," the bank hastened to explain. "Dankner received no wink or hint from anyone."

Never mind the denials. Fischer's expected stand on the deal is relatively clear.

The Bank of Israel is expected to approve Dankner's request to join the controlling interest of Hapoalim. This is because the central bank feels that it has no other option or way to give any other answer.

Dankner's request will come, if at all, through the Supervisor of Banks. Dankner will ask officially to receive approval from the supervisor to join the controlling interest of the bank.

It should be remembered that Dankner was already part of the controlling group in the past - and since there was no reason to disqualify him then, there is no reason now.

According to the bare criteria, Nochi Dankner and IDB easily pass the test, and the bank's official opinion would end there. But the Bank of Israel's job does not end only with bank supervision. The central bank has other responsibilities.

Among them are the responsibility for being the senior economic body overseeing the Israeli economy.

The purchase of control in Bank Hapoalim by Dankner, through IDB, raises serious economic issues of concentration, competition, centralization, etc.

It is not clear whether the Bank of Israel has legal status over all those matters, but it certainly has moral and analytical rights and responsibilities.

Officials at the bank are aware of the implications raised by the deal. Estimates are that just like in the other regulatory offices in Jerusalem, bank officials are not overjoyed by the prospects raised by the deal.

Therefore, the interesting question is not whether the Bank of Israel will approve the deal - since it is expected to do so - but what it will say about it.

Will the central bank express its displeasure with the growing concentration of economic power in the economy before it gives its approval - or even at the same time as it provides the green light? Will it try to make a public stand against the deal, or will the bank prefer to do only what the letter of the law requires it to do and say - and nothing else?