Why Bank Managers Must Have the Right Background to Get a Foot in the Door

A few years ago United Mizrahi Bank CEO Victor Medina was asked how he obtained his generous terms of employment. "Tell me," replied Medina, who tries to avoid the public interest in his payslip, "do you think that if the controlling shareholders could have found someone cheaper they would not have hired me?"

It is hard to find a more exclusive executives' club than that of the Israeli banking system. This club is so hard to enter that there is hardly a manager who traveled the commercial, industrial or high-tech road before reaching banking. Medina is the only CEO of a bank today who managed an industrial company - Israel Chemicals - before joining the bank. Medina's resume, however, also includes years of public office at the Bank of Israel and the Finance Ministry.

Most bank executives rose through the ranks at the central bank or the treasury, with only a minority starting their careers at banks. Even managers who grew up in the banking system usually found their first administrative position at a different bank. Bank Leumi supplies most of the managers to the system. Israel Discount Bank CEO Giora Ofer, for example, grew up at Leumi and until a year ago served there as manager of the commercial division. His predecessor, David Granot, currently CEO of the First International Bank (FIBI), also started out at Leumi, where he managed the bank's branch in Britain and its capital market division. Granot's first administrative post was at Union Bank (Bank Igud).

FIBI board chair Shlomo Piotrkowski, formerly the bank's CEO, had previously served as deputy CEO at Leumi.

Executive positions at the banks are held relatively longer and are more stable than is the case in other industries. This fact seems to be connected in large part to the long period of good fortune enjoyed by Israeli banks in recent years. The only bank that is in trouble, Discount, is also the only one coping with a shake-up of its senior executive level.

A possible explanation for the plethora of former treasury and central bank workers in the executive ranks at the banks can be found in the structure of the ownership of the banks. Until the mid-1990s most of the banks were largely state-owned, so the people who had been in charge of them were assured comfortable employment arrangements. The experience in handling large budgets and financial matters that these executives brought with them from their former posts also helped them to integrate easily into the banking system.

In another two years the controlling shareholders of Bank Hapoalim will have to decide on a replacement for Amiram Sivan, who will complete his term as chairman of the bank's board of directors in 2003. The candidates who have been mentioned are Zvi Ziv, Eli Yunis and Shai Talmon. The latter two have worked for the treasury, while Ziv has worked for Hapoalim. It will be interesting to see whether the shareholders will prefer someone from inside the bank or an outsider. There is also the possibility that someone else from another bank will be chosen (perhaps Galia Maor, from Leumi).

There are also very few interlopers among bank vice presidents. Most of them have worked their way up from the inside and are very familiar with the structure of the bank and its corridors of power. The banks say they prefer insiders because only people with the right financial background can fill an executive position in the bank's management.