Governor of the Bank of Israel Prof. Stanley Fischer and Supervisor of Banks Rony Hizkiyahu made it clear to Bank Hapoalim (TASE: POLI; LSE:80OA) controlling shareholder Shari Arison at their meeting on Monday that unless the bank makes far-reaching changes in its procedures, Hizkiyahu will consider applying Article 11A of the Banking Regulations, which means the initiation of procedures to remove Bank Hapoalim chairman Dan Dankner.
It was made clear at the start of the meeting that the conduct of Dankner would be the topic of discussion. Arison's attorney and close aide Pinchas Rubin and Bank of Israel legal counsel Tida Shamir were present at the meeting. Shamir had prepared the legal counter-arguments to possible claims raised by Rubin, some of which have been made in the past. Deputy Supervisor of Banks David Zaken, who is responsible for banking activities, was also present.
At some point during the meeting, Arison made a kind of argument - a complaint or expression of resentment - that for unclear reasons she felt that the Bank of Israel was out to get her. She was presumably referring to the fact that Bank Hapoalim is the only bank controlled by a single person - a woman, and an exceptional one - who is the focus of media attention that goes beyond the business press; and a spiritual woman who publicly expresses opinions that are out of the ordinary.
Fischer and Hizkiyahu responded that, as far as relations with the banks and their controlling shareholders were concerned, their only consideration was the stability of the bank and its soundness.
Arison and Rubin believed that the meeting was going to focus on criticism of the procedures that led to the appointment of Bank Hapoalim deputy CEO Zion Keinan as CEO. A few days before the meeting, Rubin sent Hizkiyahu an opinion by Prof. Lucian Arye Bebchuk, which defended the procedures and argued the conduct of the bank, its board of directors, and chairman were proper in this matter.
As it turned out, Keinan and Hizkiyahu's dissatisfaction about his appointment and how it was made, were peripheral matters at the meeting. Instead, it focused on problematic instances in Bank Hapoalim's conduct, which required the intervention of the Banking Supervision Department.
Fischer and Hizkiyahu cited seven instances in which Hizkiyahu urgently intervened in a decision taken by Bank Hapoalim.
- The last minute blocking of the acquisition of banks in Ukraine and in Russia, after the contracts had already been signed.
- Ordering the bank to sell its mortgage-backed securities (MBS) immediately, rather than wait and risk additional losses.
- The unexpected and unexplained ouster of former chairman, Shlomo Nehama, by Arison.
- Arison's announcement that Dankner would become chairman and Irit Isaacson would become vice chairwoman. Hizkiyahu blocked Isaacson's appointment, saying the bank's board must decide on a vice chairman.
- The ouster of director Amir Barnea by Rubin, with the consent of Dankner, for Barnea's criticism of Arison's management of the bank.
- The resignation of president and CEO Zvi Ziv and the appointment of deputy CEO Zion Keinan within a few minutes.
- Arison's appointment of Iris Dror, with Dankner's consent, as a director of the bank. Hizkiyahu opposed the appointment for a long time because of Dror's lack of suitability and ability to contribute to the board of directors. Hizkiyahu's continued until Rubin presented a legal position that Hizkiyahu had no right to intervene in this specific case.
Fischer and Hizkiyahu's opposition to Dror intensified after a recent interview with "Globes" magazine "Lady Globes". Her comments exacerbated the doubts about Arison's business decisions and concern about Bank Hapoalim's circumstances. They also strengthened the arguments against Dankner's conduct, because he does not stand up to Arison and enables her to improperly intervene in the bank in an unhealthy way.
Published by Globes [online], Israel business news - www.globes-online.com - on April 22, 2009
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