State pulling plug on Industrial Development Bank

The prime minister, finance minister and Bank of Israel today decided to close down the beleaguered Industrial Development Bank (TASE: INDD.GG), which lost NIS 150 million over two quarters due to bad debts.

The top team decided on a series of steps that will inevitably culminate in the bank's closure.

The key step involves selling its assets and commitments to another bank.

The Bank of Israel will extend Industrial Development Bank credit to keep it liquid needs, if required.

The treasury agreed that state deposits at Industrial Development Bank will serve to secure the credit and deposits by the public, until the bank's operations can be sold. The decision grants precedence to deposits made by the public.

The Bank of Israel announced that the board of Industrial Development Bank approved the moves, and agreed to cooperate. The prime minister's office, the Finance Ministry and Bank of Israel stressed that requisite steps will be taken to keep Industrial Development Bank stable until its assets and deposits are sold.

Market sources surmise that its activities will be bought by Bank Hapoalim(TASE: POLI) and Bank Leumi (TASE: LUMI), which each have stakes in the troubled bank.

Israel Discount Bank (TASE: DSCT) also holds a stake in Industrial Development Bank but is in no financial condition to bid for any of its assets.

The Tel Aviv Stock Exchange suspended trade in Industrial Development Bank securities Monday, until clarification of media reports on the sale of its credit portfolio.

Yesterday treasury officials met with board members of Industrial Development Bank to discuss selling all or part of the bank's credit portfolio. Hapoalim chief executive Eli Yones took part, as did Leumi's CEO Galia Maor, as well as representatives of the Bank of Israel. No representatives of the Industrial Development Bank took part in the meeting.

The high-level meeting was called after reports on the trouble at Industrial Development Bank started a run on the bank. Hundreds of millions have been withdrawn, leading to fears that the state would have to extend more credit than originally planned.

The decision to close the bank comes mere days after the state extended it 30 days to come up with a rehabilitation plan.

More from Technology

Elon Musk's Latest Twitter Tirade Is the Dumbest Thing on Wall Street

Elon Musk's Latest Twitter Tirade Is the Dumbest Thing on Wall Street

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Some Companies Are Already Feeling the Effect of GDPR

Some Companies Are Already Feeling the Effect of GDPR

Experts Break Down GDPR Risks for Investors

Experts Break Down GDPR Risks for Investors

Netflix Ready to Surpass Disney as America's Most Valuable Media Company

Netflix Ready to Surpass Disney as America's Most Valuable Media Company