Treasury counts on BoI to solve Discount Bank affair

Treasury counts on BoI t

November 5, 2009 08:37
2 minute read.

Finance Minister Yuval Steinitz said Wednesday that the Treasury was counting on the Bank of Israel to handle the demand by the Bronfman-Schron group, Israel Discount Bank's main shareholder, to oust chairman Shlomo Zohar before his contract ends. "It is within the realm of the Bank of Israel to deal with Discount Bank and we trust the Bank of Israel and its Supervisor of Banks to do their work and find out if there was any improper behavior," said Steinitz at the Treasury's Accountant General meeting in Jerusalem on Wednesday. Steinitz added though that should the matter of ousting Zohar come to a vote, the Treasury, which owns a 25 percent stake in the bank, will use its own judgement in the most professional manner and in the best interest of the bank and the good of the public. Last weekend, Zohar was asked by the Bronfman-Schron group, which holds a 26% stake, to step down from his post as chairman without providing details on the reasoning. Zohar's contract expires in February 2011 and he has reiterated he intends to stay in his position until the end of his term. Speaking at the Knesset Finance Committee on Wednesday, Bank of Israel's Supervisor of Banks Rony Hizkiyahu, said that the central bank has started an investigation into the request to oust Bank Discount's chairman. "We are looking into the question of reasons of which we are unaware for the request of Discount Bank's controlling shareholders to oust Zohar. We will meet with the managers of the bank and all sides involved in order to understand why this move was made and why in this manner," said Hizkiyahu. "We have not initiated any action against Bank Discount regarding the dissatisfaction from its management or the request to change management at the bank. Our interest is the stability of the bank." Hizkiyahu added that the owners of a bank have every right to make management changes but it was the central bank's role to thoroughly examine if the ousting and the reasoning is proper even in a case of voluntary departure of a bank manager. The Bronfman-Schron group acquired a controlling stake in Discount Bank from the government in 2006 and appointed Zohar as its chairman. In addition to its 25% stake in Discount Bank the state also holds an 11% stake in Bank Leumi. The Finance Ministry plans to sell off all these in a number of transactions via the stock market in 2010. "The proceeds will help us to finance the deficit. Going forward, we want to be in a situation in which we don't own any bank shares," said Finance Ministry's Accountant General Shuky Oren at the Accountant General annual conference. "In connection with the Zohar case at Discount Bank, it has been suggested that privatization is wrong and I still wish to emphasize that banks should be owned by the public or a controlling core. At the same time though, I don't call this privatization. We are not determining the banks' agenda, we are stakeholders," said Oren.

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