The Bank of Israel is requiring Bank Leumi to sell off all its holdings in two of its three conglomerates as soon as possible and no later than September 30, 2006, refusing Leumi's request for a 30-month grace period, the country's second largest bank said Sunday. Bank Leumi must decide whether it wants to keep its 18.4-percent stake in the Israel Corporation, its 15.8% stake in Africa Israel Investments, or its 19.9% holding in Migdal Insurance Holdings. The 1996 legislation prompting the central bank's decision forbids banking corporations from holding a stake in more than one "conglomerate," defined as a company with more than NIS 1.73 billion in equity that is active in more than three areas of business. Bank Leumi recently discovered that Africa Israel now falls under the legal definition of a conglomerate, following publication of the company's second-quarter earnings and further clarifications, and contacted the central bank to request a 30-month grace period to comply with the law. Bank Leumi spokesman Yoav Poles said the bank is "putting aside for now" the option of selling its stake in Migdal, valued at NIS 1.28b. according to the current market capitalization, "since in our opinion Migdal is not a conglomerate" because it is not active in more than three areas of business. The Bank of Israel "may or may not" accept this argument, however, he said. Therefore, Bank Leumi is deciding between selling its holding in Africa Israel, currently worth NIS 1.2b., or its stake in the Israel Corporation, valued at NIS 2.38b., according to the current market cap. Even if the central bank agrees that Migdal is not a conglomerate, Bank Leumi is still required to reduce its stake in the company to 10%, in accordance with the Bachar Reform passed in late July. The Bank of Israel already granted Bank Leumi an extension to handle the sale of its Migdal stake if it is one of the conglomerates to be sold. Bank Leumi would have until March 31, 2007 to reduce its stake to 10% and until one year later to sell the remainder. "Of course we would be interested in maintaining the 10% stake. Migdal is an excellent company," Poles said.