The Bank of Israel has formulated a $200 million loan guarantee arrangement for Trade Bank customers. The arrangement is intended mainly to compensate small depositors. The government's participation in the arrangement represents only 40% of the NIS500 million in Trade Bank deposits made by the public in 2001. The government approved the proposal today.
According to the arrangement, Trade Bank managers, directors, options-holders, controlling shareholders and parties-at-interest will not be compensated. Persons against whom lawsuits will be filed, whether they are involved in gray market activities or bank employees suspected of embezzling funds, will not receive compensation of any kind. Moreover, due to these legal proceedings, these persons will most likely have their accounts impounded.
According to the arrangement, only Trade Bank account-holders will be compensated. Compensation will not be granted automatically, and a good deal of time will elapse before payment is actually made, in order to separate between real accounts and the counterfeit ones used to embezzle.
The cabinet decision grants full compensation to deposits of up to NIS 4 million, and 95% of all sums thereafter.
The decision to only partially compensate large deposit-holders stems from the Bank of Israel's assumption that these deposit-holders should have been aware of the danger in depositing such large amounts in a small bank like Trade Bank.
The decision also says that the Governor of the Bank of Israel has the right to cancel the guarantee arrangement as he sees fit.
Published by Globes [online] - www.globes.co.il - on May 12, 2002