From transgressions to transparency

Banks contributed inordinately to Israelis' cynicism about those in positions of influence.

By
April 8, 2006 21:24
3 minute read.
From transgressions to transparency

Fischer 298.88. (photo credit: Ariel Jerozolimski)

 
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Banks contributed inordinately last week to the average Israeli's already overdeveloped cynicism about those in positions of influence. First came figures attesting not only to unprecedented profits in the private banking sector but also to through-the-ceiling remuneration of which the top bankers avail themselves, though not only by virtue of excellent management. A considerable portion of the revenue accrued by our commercial banks derives from the shameful imposition of superfluous and exorbitant fees on ordinary households. In other words, the top brass does so well in no small measure at our expense, and unjustifiably so. But if this weren't demoralizing enough, the real shocker was served up on Thursday. New-broom State Comptroller Micha Lindenstrauss took on the Bank of Israel, an institution once all but immune to his predecessors' scrutiny. He issued a scathing report whose bottom line is that officials in charge of supervising our entire financial system - including making sure that commercial banks conduct their business on the up-and-up - had been putting their own hands in the national cookie jar. BOI's highest echelons, it transpires, have also been living very well indeed at our expense. Things are so bad that the comptroller has turned some of his findings over to the attorney-general for further investigation, to ascertain no felonies were committed. Lindenstrauss also demanded that all benefits obtained illicitly be repaid forthwith. Involved are egregious perks, whose monetary value never appeared on pay-slips. Thus BOI officials awarded themselves extraordinary retirement benefits, exploiting a slew of loopholes, as well as simply creating a separate set of standards for themselves, above and beyond anything permitted in the civil service. This ranged from fictional tenures in office to redeeming fantastic numbers and imaginative categories of "leave days." These alone were worth millions. They also awarded themselves loans with dream terms, some of which were even written off altogether. There's more, too; much more. Lindenstrauss wrote that "often no connection exists between names accorded various benefits and their actual nature. These [euphemisms] camouflaged awards of huge sums by the BOI to its officials." Worse yet, Lindenstrauss noted that this was done with the full knowledge and acquiescence of previous BOI governors, Ya'acov Frenkel and David Klein. Yuval Rachlevsky, former Finance Ministry director of wages and the true hero of this episode, has made allegations of severe irregularities in the BOI for the past three years. His attempts to carry out in-depth investigations prompted the BOI under Klein to petition the High Court to keep Rachlevsky at arm's length on the grounds that the BOI is an independent institution, not answerable to the Finance Ministry. The only encouraging development is that new governor Stanley Fisher, apprised of what Rachlevsky uncovered even before Lindenstrauss entered the picture, began to put the BOI house in order. There's no disputing the need to offer civil service banking experts special bonuses to mitigate private sector allures. In terms of remuneration, the distinct advantage will always be with the latter - for one thing because they generate income. Nevertheless, underhanded and rule-bending machinations are unseemly for any public institution, all the more so for one expected to constitute a model of virtue, as befits its supervisory responsibilities. But at a time when the government is calling for all to tighten their belts, such behavior is reprehensible. If anything can cause the populace to lose its remaining faith in the system, it's the spectacle of the supposed upholders of the rules breaking them for their own selfish interests. A thorough investigation is essential to discover whether the bank crossed the thin boundary between the unethical and the illegal. Moreover, restitution of ill-gotten gains should be secured. But most of all, it's high time the spotlight was turned onto the BOI's least accessible corners. It can do with considerably more legal regulation and supervision, as suggested by the new bill that calls for the establishment of a public BOI board of directors. The BOI, of all institutions, cannot be allowed to operate in shadows. More transparency is a mandate.

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