Bank on It / Shaking Up Bank Leumi

The strange situation into which Bank Leumi has been forced because of the need to select its next chairman requires immediate intervention by the supervisor of banks.

It's hard to decide which problem is more serious: the involvement by politicians in the appointment, which is actually illegal, or the involvement of major borrowers who hold stock in the bank. The scenario in which a chairman will be appointed to Leumi by someone who doesn't hold a permit to own a controlling interest in the bank, is absurd.

Finance Minister Yuval Steinitz became involved exactly a week ago, when a letter landed on his desk from the Ometz watchdog organization. Ometz demanded that Steinitz block Bank Leumi CEO Galia Maor from joining the board as director and chairwoman, on the grounds that this appointment - which she reportedly seeks - would violate the law. Bank of Israel Governor Stanley Fischer received a similar letter.

Over the past few months, as incumbent chairman Eitan Raff's contract rolls to a close, Steinitz has received about 10 requests from people seeking his support for their appointment to the board or as chairman of Leumi. Some of the requests were referred to the finance minister from the Prime Minister's Office.

The letter from Ometz prompted Steinitz to request a professional opinion from his ministry's legal adviser, who explained that under law, Maor is subject to a two-year cooling-off period because she is a bank employee. She couldn't join the board at the end of her service as the bank's CEO in any case.

The legal adviser, Joel Baris, said he consulted with Deputy Attorney General Avi Licht on the matter and that Licht, too, had come to the conclusion that Maor had to undergo a cooling-off period.

Politicians get involved

Was the PMO somehow involved in the legal opinion, behind the scenes? There's no way of knowing. What is clear, however, is that the legal and governmental stance on the issue is unequivocal: Maor is subject to a waiting period.

Armed with the advice of legal counsel, Steinitz approached the head of Bank Leumi's appointment committee, which is responsible for recommending board candidates at a general shareholders' meeting of the bank, where in practice such appointments have been made ever since the bank was nationalized in the mid-1980s.

As far as is known, Steinitz hasn't tried to push any candidate. But he has made it absolutely clear to appointment committee chairwoman Margalit Nof that she must obey the law.

The committee has a problem. It likes Maor, who is considered a professional banker of integrity, but it's clear that Steinitz will not be able to support her appointment even if he wanted to, in light of the legal opinion.

In the meantime, it turns out Maor has the support not only of the appointment committee, which represents the state's stake in the bank, but also of three big shareholders: David Azrieli, Alfred Akirov and Yitzhak Tshuva.

The three are among the bank's biggest borrowers - which begs the question of how a chairman or chairwoman can deal with business matters that involve the borrowers who appoint him/her.

Maor's situation is thus very unclear: Assuming the finance minister intends to scuttle her appointment, it is difficult to see how she can successfully navigate the obstacles on the road to the chairman's position.

Bank of Israel Governor Fischer and supervisor of banks Roni Hizkiyahu have yet to state their positions.

In a situation in which politicians are meddling on one side, and major borrowers are on the other, the active involvement of the Bank of Israel is required to ensure that a banking institution whose directors have been free of outside influences for years will continue to act in a proper manner and not turn into a forum where unsavory deals are cooked up.