This Day in Jewish History

1899: A Zionist Trust Is Formed to Settle Palestine

Created in 1899, the Jewish Colonial Trust would weather Turkish suspicions in World War I and become the bank for the State of Israel.

Yael Engelhart

On March 20, 1899, the Jewish Colonial Trust, the financial institution entrusted by the Zionist Organization with responsibility for supporting and funding the efforts to establish the Jewish national home in Palestine, was created, in London. During the decades that followed, via its various permutations, the Trust eventually evolved into what is today the Bank of Israel.

The Second Zionist Congress, which met in Basel, Switzerland, on the end of August 1898, recognized the need for a body that would hold and distribute the funds being collected from Jews around the world as they joined the fledgling Zionist movement. Early on, that movement pledged itself to purchasing land in Palestine and to developing its agriculture, industry and general infrastructure.

This required an institution that had lines of credit and the ability to invest and move funds. The Congress accepted the proposal of David Wolffsohn, Max Bodenheimer and Rudolph Schauer, all senior figures in the movement, and resolved to establish a bank.

The formal incorporation of the Jewish Colonial Trust took place in London on March 20, 1899. When the major Jewish philanthropists of the era balked at putting up the seed money of the bank, it was decided to turn to the Jewish public: An offering of 250,000 shares of £1 sterling as floated on the London Stock Exchange. To guarantee the ability of people from every economic class to participate, payment plans of up to 80 installments were made available.

A bank in Palestine

On February 27, 1902, the Trust established a banking subsidiary in Palestine, called the Anglo-Palestine Company, with initial capitalization of £50,000. Its first branch was in Jaffa, at the time the port of entry for immigrants to the Land of Israel.

In the years that followed, additional branches were opened in Beirut, Jerusalem, Gaza and several other cities in the region. Credit unions were established, and loans were made for both rural and urban development.

World War I constituted a major challenge to the new bank, which, with its legal base in London, was viewed by the Turkish government that ruled Palestine as an enemy institution. The Turks not only ordered its physical offices to close, but also attempted to confiscate its assets. The bank’s local administrators, however, operating out of the Spanish consulate in Jerualem, managed to move its funds out of harm’s way.

While the Trust remained the parent holding company, 90 percent of its capital was invested in the Anglo-Palestine Bank, whose importance and activity grew in parallel with the Jewish community in Eretz Israel. But the two companies had common executive leadership, and they served as each other’s representatives in their respective bases. In 1932, the APB moved its headquarters from Jaffa to Jerusalem.

Bank to the government

With statehood, in 1948, the APB became the government’s bank, and was empowered to issue currency. Two years later, it changed its name to Bank Leumi Le’Israel – National Bank of Israel – and changed its registration from London to Jerusalem.

With the establishment, in 1954, of the Bank of Israel, to assume the roles of the government bank, Bank Leumi was transformed into a commercial bank.

Some 70 years after the Holocaust, measures were taken by the Israeli government to deal with the fact that about half of the still-outstanding shares of the Jewish Colonial Trust had been owned by people who perished in the Holocaust, and whose heirs – if they had any – were unlikely to even be aware that their ancestors had invested in Zionist Movement’s bank. A process of identifying the shareholders, and determining their fate, got underway seriously during the past decade, and a company, called Hashava, was designated by the government to take delivery of unclaimed shares and use the funds for the benefit of Holocaust survivors.