The Bank of Israel failed to inform Prime Minister Ariel Sharon and Finance Minister Silvan Shalom about the deteriorating condition of Industrial Development Bank, government sources told

Ha'aretz

.

The sources say that on July 18, Sharon convened a routine discussion on the economy, with Shalom and Bank of Israel governor David Klein. The meeting was held several days before the situation of Industrial Development Bank hit the headlines but two months after the central bank, the Finance Ministry and the Government Corporations Authority (which reports to the Prime Minister's Office) had begun discussing the bank's situation between them.

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During that hour-and-a-half meeting July 18 meeting with the prime minister, say the government sources, David Klein never mentioned Industrial Development Bank once.

When the run on the bank began, sparked by the headlines, the prime minister summoned Shalom and Klein for an urgent meeting to discuss the bank's situation.

"It is strange that on the one hand, the governor claims that the central bank repeatedly warned about crisis at Industrial Development Bank, but on the other hand he felt no need to report it to the prime minister and finance minister in one of the many meetings they had in the three months before the bank collapsed," a senior source said.

The Bank of Israel rebuts that on May 28, 2002, Supervisor of Banks Yitzhak Tal sent a letter to Shalom warning him of Industrial Development Bank's condition. The meeting on July 18 was about the 2003 budget, the central bank said.