The Bank of Israel is angry at the apparent foot-dragging by Israel Discount Bank's (TASE: DSCT) controlling shareholders, the Bronfman Schron group, regarding a rights offering.
At a meeting last week Bronfman's representatives presented no practical plan with a specific timetable for raising capital to Supervisor of Banks Rony Hizkiyahu. Instead, the representatives spoke in general catchphrases about their commitment to the bank. The reason appears to be a dispute within the Bronfman Schron group. A new meeting with Hizkiyahu has been scheduled for August.
Discount Bank has the lowest capital adequacy ratio among Israel's banks, at 10.42% at the end of March. By Thursday, at Hizkiyahu's order, the bank is due to submit a detailed plan to raise its capital adequacy ratio to the Bank of Israel-mandated minimum of 12% by the end of 2009.
After the meeting, Bronfman's spokesman released a cliche-filled statement, which said, "The controlling shareholders intend, in full coordination with the Bank of Israel, to work to lay the necessary foundations to strengthen the contribution of Discount Bank to the Israeli economy."
The Bank of Israel was unavailable for a response.
Originally, Discount Bank was to hold a NIS 500 million rights issue by November. Two weeks ago, the bank submitted a draft prospectus to the Israel Securities Authority, on the basis of which, once approved, the bank could raise all the necessary types of capital, including shareholders' equity, by means of a rights issue.
Since Discount Bank apparently can achieve the 12% capital adequacy ratio without a rights issue by reducing the risk assets, raising equity, and on the basis of its profits in 2009, its controlling shareholders reportedly fell no urgency to commit to holding a rights issue at this time. Nevertheless, a capital injection will be necessary, because the capital adequacy calculation based on Basel II - The New Basel Capital Accord of the Basel Committee on Banking Supervision will lower the bank's capital adequacy ratio to 11-11.3%.
Published by Globes [online], Israel business news - www.globes-online.com - on July 27, 2009
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