Sources inform ''Globes'' that Bank Leumi (TASE: LUMI) will close its branch in Panama, due to low profits and high regulatory costs. The closing is part of the bank's reevaluation of its international business operations, due in part to an investigation by the US Internal Revenue Service into suspicion that the bank helped US citizens evade taxes.
Bank Leumi could face a fine of up to $150 million from this investigation, and it made a NIS 340 million provision for this in its financial report for the fourth quarter of 2012, which will be published next week.
Bank Leumi Panama mainly provides foreign trade and short-term financing. Most customers are business customers, importers of goods from Asia, which are re-exported to Central and South America.
Bank Leumi said in response, "Bank Leumi's board of directors and management from time to time discuss its international strategy and its international provision, with attention to the regulatory requirements in each location, the company's risk and capital management, changes in the location and importance of financial centers in the world, and so forth. Discussions about the presence and kind of presence in Panama are held in this context, similar to other branches and representative offices, and if our policy in this regard changes, the bank will announce it through the regular channels."
Israel banks have been scaling back the international operations on which they previously embarked, because many of these operations have had low profitability, or even lost money. Another reason which sometimes affects a decision is strict regulations in other countries, beginning with the US. Regulations which differ from Israeli regulations, heavy penalties, and remote control by headquarters have caused legal complications for some banks.
First International Bank of Israel (TASE: FTIN) closed its London office, and Bank Hapoalim (TASE: POLI) is following suit, after deciding a few months ago to close its Singapore branch and transfer the activity to Hong Kong and China.
Published by Globes [online], Israel business news - www.globes-online.com - on March 11, 2013
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013