BoI stops Hapoalim CEO appointment

Israel's central bank freezes Zion Keinan's replacement of Zvi Ziv in order to assess decision.

A Bank Hapoalim branch 248.88 (photo credit: Ariel Jerozolimski)
A Bank Hapoalim branch 248.88
(photo credit: Ariel Jerozolimski)
Israel's banking watchdog has blocked the appointment of a new chief executive at the country's largest bank - an extraordinary intervention reflecting the turmoil roiling the global financial industry. Bank Hapoalim said in a statement to regulatory authorities Monday that the Bank of Israel's supervisor of banks ordered the appointment be held up so he could assess the decision-making process. In a letter Sunday, banking supervisor Rony Hizkiyahu instructed Hapoalim "not to move ahead with the board's decision to appoint a new CEO until he finishes investigating the matter," Bank Hapoalim said. Hapoalim had no comment on the central bank's concerns. Zion Keinan was tapped to replace Zvi Ziv, who announced last week he would resign because of disagreements with Hapoalim's chairman, Dan Dankner, over the bank's future. A Bank of Israel spokesman did not immediately return a call seeking comment. Economic commentator Nehemia Shtrasler said the central bank has been worried about developments at Hapoalim "for a long time," including a 2008 write-off of more than $1 billion because of the bank's exposure to U.S. mortgage-backed securities. The Bank of Israel "is worried about risk management at the bank," said Shtrasler. "The question is whether Zion Keinan is the most appropriate person. He doesn't have a wide-ranging background in credit and investment risk management." Hapoalim, like other banks, will have to restructure loans taken by major debt-holders, Shtrasler added. "And there is a lot of fear (at the Bank of Israel) that Mr. Keinan doesn't have the appropriate experience." Keinan is currently head of Hapoalim's corporate banking division and deputy CEO since January 2006. The bank is owned by a group led by billionaire Shari Arison.