Supervisor, on Bank Discount: 'That's No Way to Behave'

Top finance officials took turns taking swipes at the owners of Israel Discount Bank, for the manner in which they have set about replacing the bank's chairman.

"That's no way to behave," said supervisor of banks Rony Hizkiyahu in conversation with Knesset members after a Knesset Finance Committee meeting on the scandal.

Without stating the reason, at the start of the week the Bronfman-Schron group, which owns the 26% controlling interest in Discount Bank, suddenly demanded that chairman Shlomo Zohar quit by year-end. Zohar for his part refuses to obediently bow out: He means to stay until his contract expires at the end of 2010, he told the bank's directors at a board meeting on Tuesday.

Also yesterday, Finance Minister Yuval Steinitz wondered about the bank owners' conduct. "The banks are not their owners' captive," he said on Army Radio. Asked if the owners had "misled" the Finance Ministry by stating that Zohar wanted to resign, Steinitz said he'd rather not comment.

Earlier in the day, addressing the Knesset Finance Committee, Hizkiyahu said, "The bank's stability cannot be compromised, for any reason. The supervisor of banks [himself] has a say in the matter, and the bank's controlling shareholders will have to consider it."

The group owned by Matthew Bronfman and Robin Schron never did say what their issue with Zohar is, though they have reportedly been unhappy with him for months. But as the supervisor, an officer of the Bank of Israel, said yesterday, whatever the facts may be, the sheer uproar the affair has created is "bad for the system." The supervisor of banks' mandate is to keep the banking system stable, Hizkiyahu added. At this point, the flames need to be dampened so his department can look into the matter in peace.

Looking into the matter involves meeting with the bank's owners and managers, and with representatives of the state, which owns 25% of Discount Bank, Hizkiyahu said. Moreover, it involves doing so discreetly.

"The moment we find anything, or don't find anything, and reach conclusions, we shall advise the Finance Committee. Meanwhile we think the less said, the better," he said.

Asked by the Knesset members for theories, Hizkiyahu said, "I assume the controlling shareholders didn't ask him to leave because they were pleased with him. They deny having given him a dismissal notice on Shabbat eve and say they did so long beforehand. We are not aware of confidential discussions between the owners and their [bank] officers. The controlling shareholders have the right to receive dividends and to appoint directors. They have the right to replace directors, but the problem is the manner and the reasons behind this case."

In short, the Bank of Israel wants to see if the Bronfman-Schron's reasons are strong and whether Zohar's ouster followed proper procedure.