Most analysts agree that lackadaisical regulation was a key contributor to America's financial crisis, which spread from Wall Street and quickly infected the rest of the world. In a free-market economy nobody wants to stifle private enterprise. At the same time big banks, secure in the understanding that no central government can afford to let them fail, haven't always lived up to their fiduciary obligations to run their affairs with all the responsibility and transparency they owe their depositors and shareholders. That's putting it mildly. Many banks plainly bring the regulators' wrath upon themselves. Bank Hapoalim is a case in point. Last Monday, and again yesterday, Shari Arison, who holds its controlling stake, was read the riot act by no less than Governor of the Bank of Israel Stanley Fischer and Supervisor of Banks Rony Hizkiyahu. In an unprecedented move, they raised profound concerns over how the bank is managed. Their anxiety about Bank Hapoalim operations has long been brewing. More than any other large local bank, Bank Hapoalim burned its fingers in the recent American subprime mortgage debacle. This was accompanied by a series of near-disasters: in Eastern Europe, where Bank Hapoalim planned to acquire Russian and Ukrainian banks; and locally when its central computer system crashed not long ago, a breakdown which came close to causing outright panic. Arison pushed out Bank Hapoalim's highly regarded chairman, Shlomo Nehama, and replaced him with yes-man Dan Dankner. Dankner proceeded to clash with both Hizkiyahu and the bank's own chief executive Zvi Ziv. In frustration Ziv resigned last month, just ahead of the bank's disappointing 2008 financial report. In less than three minutes Dankner rammed through the appointment of Zion Keinan to replace Ziv. The absence of any proper executive search leading up to either the Dankner or Keinan appointment was too much for the regulators. Bank Hapoalim appeared to be administered by personal caprice. Hizkiyahu consequently refused to approve Keinan's appointment. He judged him unsuitable for the job - but more than anything, it was the 2:50-minutes in which Keinan's appointment was rubber-stamped that riled the supervisor. Hizkiyahu and Dankner appear locked on a collision course. Yet Arison's armor seems not to be dented despite Fischer's weighing in on Hizkiyahu's side. Though told off, she issued a defiant statement of unstinting support for Dankner. THERE'S NO telling where things will progress from here. Any bank is dependent on central bank goodwill for major operational decisions. Moreover, while there may be no simple legal procedure for Hizkiyahu to force Dankner out, he may render Dankner's position untenable by undermining confidence in his performance. The central bank's disfavor can become a crippling liability especially in these hard times - as Arison may well discover. No matter how things play out, however, the confrontation in itself is good news for the Israeli public. If anything, this episode demonstrates that someone is looking out for our interests. Stringent scrutiny is our insurance policy. At stake is not just the holdings and business prerogatives of Arison and her entourage, but the savings and peace of mind of ordinary citizens and investors. For the most part, Israel's much-maligned bureaucratic machinery succeeded relatively well in keeping our banks out of the trouble which sucked in so many of their larger and more powerful counterparts overseas. Worldwide, governmental safety nets - meaning the realization that toxic assets and losses will be written off at taxpayer expense - have tempted banks, Israeli as well, to take risks. Recklessness to one degree or another and, in our local environment, inordinate fees as well, make regulation indispensable. If anything is to be learned from the cumulative regulatory shortcomings which gave us the global credit crunch, it is that when a pattern of problems and/or questionable behavior is discerned in a given bank, it's up to the government's regulatory agencies to sound the alarm bells. In times of prosperity, regulation by and large gets a bum rap. And yet, it is in the power of vigilant regulators to spot incipient dangers and prevent collapses. Fischer and Hizkiyahu enable Israelis to sleep better.