Hapoalim to Release Highlights of Bank Supervisor Report Today

The main points of a Bank of Israel report on recent events at Bank Hapoalim are to be made public Thursday morning.

The main points of a Bank of Israel report on recent events at Bank Hapoalim are to be made public this morning, after the Israel Securities Authority decided on Tuesday to require Hapoalim to publish the highlights.

The report, by Supervisor of Banks Rony Hizkiyahu, details the chain of events leading to and following the replacement late last month of Hapoalim CEO Zvi Ziv by Zion Keinan.

Observers expect the report to be highly critical of the bank's management. But senior figures at Hapoalim said they can provide satisfactory responses to any charges laid against the board of directors.

In a related move, Hapoalim controlling shareholder Shari Arison held a meeting in her office on Tuesday with her attorneys, Pini Rubin and Ram Caspi, and the beleaguered chairman of the board, Danny Dankner.

Bank of Israel governor Stanley Fischer has asked Arison to dismiss Dankner, citing problems at Hapoalim since he took over as chairman from Shlomo Nehama in March 2007. Rubin and Caspi declined to disclose details of the meeting to reporters.

The bad blood between Arison and the Bank of Israel began a few months ago. TheMarker has learned that the central bank refused to approve an arrangement under which Arison would have received her brother Micky Arison's 23% stake in the family's holding company. Arison Holdings owns 20% of Hapoalim's shares.

Arison announced the deal in September, but it never went through. Arison said in the past that she was not buying the shares, but acquiring them in a family transaction.

Even though Arison's request for the Bank of Israel's approval of the deal was submitted months ago, it is difficult not to draw a connection between the central bank's refusal to grant its approval and the latest hurricane to hit Hapoalim, and to conclude that the Bank of Israel does not want to see Arison consolidate her holdings further.

Over the past two and a half years, Arison has fortified her control by removing Len Abramson and a group of American investors from the controlling group of shareholders, acquiring Nehama's stake in the bank and buying up additional shares on the market. Both the Arison Group and the Bank of Israel declined comment.

During the past two weeks, Fischer met twice with Arison and asked her to show Dankner the door. At their next meeting, the central bank chief is expected to demand Dankner's immediate dismissal. If that does not work, he will use his powers as central bank governor to effect Dankner's removal himself.

So far, Arison has given her full support to Dankner, but the word on the Street is that in the end, she will have to knuckle under to Fischer.

Fischer is the one leading the charge for Dankner's dismissal, and he has taken a more extreme stance than Hizkiyahu. Fischer apparently believes that after a string of managerial stumbles at Hapoalim - nine, to be precise - the chairman must go. However, the central bank is not thought to have a problem, in principle, with Keinan's appointment as CEO.

Central bank officials also reportedly believe that the conduct of Arison, Dankner and those around them indicate that they care more for their own personal interests than the stability of Hapoalim.

Meanwhile, MK Danny Danon (Likud) sent a letter Tuesday to Arison demanding that she fire Dankner by May 7 and threatened to take steps in the Knesset to remove Dankner if he is not dismissed. These could include issuing an urgent summons to Fischer to appear before the Economic Affairs Committee, submitting a motion for the agenda in the Knesset plenum or submitting a parliamentary question.

Danon said that Fischer has demonstrated devotion to Israel's economy, and it would appear that his demand to remove Dankner from his post is based on reliable information.

"Successive Israeli governments have supported financial institutions at their hour of need, so the government and the Knesset have a responsibility for economic growth and for preventing crises that could rock the Israeli economy," he added.

Danon is a candidate to chair the Economic Affairs Committee, following an agreement reached yesterday under which a Likud MK will head that body while Kadima retains chairmanship of the Foreign Affairs and Defense Committee.