Bank Discount Changes the Rules

The Israel Discount Bank is changing the rules of banking in Israel. Hadn't you noticed? Modi Baron tells everyone about it in his commercials.

The bank has extended its opening hours and offered innovative products under the slogan: "Discount is changing the rules of banking" .

Over the last three years, led by CEO Giora Offer, Discount has changed. It  can claim to have undergone a revolution. Its loans portfolio has been cleaned up. Its New York branch was properly shaken up after a money-laundering scandal and the bank's antiquated computer system has been upgraded.

Soon Discount will be able to fairly claim that it has caught up to the two big banks, Leumi and Hapoalim.

And of course there is the main change at Discount: the bank was privatized. It now belongs to Matthew Bronfman and partners.

Usually, privatization of a company brings in fresh spirit. But in the case of Discount, which suffered so many serious crises over the last decade, the expectations of a shake-up were even greater.

But two years after the bank fell into private hands, it seems Discount has managed to change the rules of privatization, too.

The bank still suffers from its powerful union, which blocks every management initiative to make the bank more competitive. Every suggestion is barred by the union's veto.

Even extending the opening hours at 30 branches was met by work sanctions so bad that the management countered with a lockout of its workers.

The union does not object to Discount changing the rules of banking; it just refuses to allow Discount to change the rules of the bank.

And this is the reason it seems like Discount was never privatized. The power of its union, its effect on the bank and its ability to subvert every move is a destructive force that has left Discount far behind the big banks.

Discount knows exactly what it has to do to progress. The bank itself, without its subsidiaries and overseas branches, has suffered from miserable profitability for very many years. Its management may have a theory that you need to view the entire concern as a whole, but this looks like avoidance of the principle problems at the bank: low operating efficiency.

The salary and benefit packages that Chairman Shlomo Zohar and CEO Giora Offer received last week are meant to move them toward making much braver decisions than in the past.

At the end of this long road, we will see if Discount has succeeded in changing its own rules, the same rules that have left it in the dust for more than a decade.