The banks have been sitting on the gunpowder barrel known as Eliezer Fishman's credit portfolio for a long time. Fishman managed, and quite easily too, to raise credit of over NIS 4 billion. Almost all the banks gave Fishman credit, headed by Bank Hapoalim and Bank Leumi, with more than NIS 1.5 billion each.
For years, the managements of the banks have understood that Fishman's debts were bad, but they still did not act aggressively towards him. They have already made provisions against all his debt, and so anything they manage to extract from him will go straight to the "recovery" line, so that as far as the stability and profitability of the banks are concerned, the Fishman case is already behind them.
In the quiet world of yore, when debt settlements were made behind closed doors in the bank's offices, the banks would probably have happily signed on the proposed arrangement, which includes a contribution from the Fishman family, and thus have closed the file. But times have changed, and now an important consideration, if not the main one, is public opinion. Today, Bank Hapoalim and Bank Leumi announced that they objected to the current settlement, and that they were demanding further details. Despite the militancy that they are suddenly showing, it should not be forgotten that it partly stems from public pressure.
The banks nowadays are in any case not beloved by the public, to say the least. The various reports about the write-down of debt that the Fishman settlement includes, and the Knesset sessions on the matter, will certainly make it hard for them to approve it. Their gamble is that they will be able to flex their muscles in public a little, perhaps make a few warlike headlines about how they are demanding more, and in the end sign the settlement, as they did with Nochi Dankner, pick up the crumbs they will receive, and, most importantly, avoid any investigation into their conduct in granting credit to Fishman.
The Bank of Israel - protecting the banks?
Supervisor of Banks Hedva Ber thought that the big borrower issue was behind her. A few months ago, she published a report summarizing the activity of the banks and the Bank of Israel in relation to the large borrowers in the Israeli economy, in which she admitted that there had been a problem in the way credit was awarded, and that it had been based on the aura of the borrowers rather than on examination of their ability to repay. As far as she was concerned, however, all that was history; the banks had learned their lesson, and credit of that kind was no longer extended.
Unfortunately, the past is catching up with Ber. The Fishman case, the biggest bankruptcy in Israel's history, is not yet behind her. The suspicion that it will end in a compromise settlement with no-one answerable for the vast sums that the banks doled out so easily and that evaporated turns the spotlight on Ber. The expectation is that the Bank of Israel will intervene and take care that justice is done.
For the time being, the central bank is trying to steer a careful course between public criticism, the involvement of the Knesset, which will hold a session on the matter tomorrow, and the unclear stance of the banks. Yesterday evening, twenty-four hours after the outline settlement was published, the Bank of Israel issued a laconic statement: "The Banking Supervision Department expects the boards of directors and the managements of the banks to examine the proposal taking a broad view of all its aspects and the issues arising from it." If public criticism grows, however, the Bank of Israel will have to take a clearer stance. Otherwise it will find itself the focus of criticism, and it will again be accused of protecting the banks.
Published by Globes [online], Israel business news - www.globes-online.com - on June 5, 2017
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