In a precedent-setting decision, Governor of the Bank of Israel David Klein announced that the Bank of Israel will guarantee deposits in Trade Bank, which was hit by embezzlement carried out by employee Esther Alon. Klein has thereby adopted the recommendation of the authorized manager for Trade Bank, Dr. David Tadmor, whom Klein appointed to the post.
Klein's decision will be submitted to the cabinet, which will have to make a special decision on the matter. The cabinet will probably accept Klein's recommendation, thereby allowing Klein to exercise his authority.
The guarantees will total NIS 150-250 million, depending on the damage the embezzlement caused depositors.
Klein explained his decision on the need to protect depositors' money and prevent wider repercussions on Israel’s banking system and other sectors. This implies that the affair was not an isolated incident, but could expand beyond Trade Bank.
Klein's decision was came sooner than expected.
The guarantees will not cover accounts held by those involved in the embezzlement, deposits of the bank's controlling shareholder and deferred deposits.
Assessments that the Bank of Israel would take upon itself the guarantees for depositors were already heard this morning, so Klein's decision did not take banking officials by surprise.
Published by Globes [online] - www.globes.co.il - on April 29, 2002