Prime Minister Ariel Sharon swiped at the Bank of Israel at the Sunday morning government meeting, in which the ministers discussed the collapse of Trade Bank.
Sharon said that the report the Bank of Israel chiefs gave the ministers indicates that the central bank still lacks the tools to deal with similar situations.
Trade Bank collapsed after a minor functionary stole a quarter of a billion shekels, over time. The Bank of Israel watchdog had failed to discover the massive embezzlement in time.
Sharon added that he was dissatisfied with the details he heard in the central bank review this morning. The review offered no answers for the questions that begged asking from Trade Bank's collapse, he said.
Finance Minister Silvan Shalom advised the government that he is considering launching a supervisory bureau to handle such cases. The bureau, based on the British model, would include officials from the Bank of Israel, the Securities Authority and the Finance Ministry.
The prime minister said he supports Shalom's idea.
The Bank of Israel commented that further to the government debate, the governor will be compiling a comprehensive report that discusses open issues:
1. The structure of supervision over the banks, and how it should be adjusted in light of the Trade Bank incident.
2. The structure of the banking establishment and of the financial services sector, with an eye on improving competition.
3. Whether the regulations governing the opening of new banks should be revamped.
4. Should bank deposits in Israel be guaranteed. (Trade Bank depositors will be receiving money back, up to a certain ceiling.)
5. Coordination between the various watchdogs.
Sharon cancels participation in fundraiser
In another sign of the tension between Ariel Sharon and Shas, the prime minister on Sunday cancelled his attendance at a gala fundraising event for the ultra-Orthodox party's educational system, which is scheduled for Monday night in Tel Aviv.
Shas spokesman Itzik Sudri announced Sunday that the decision to cancel Sharon's attendance had been a mutual one.
Israel Radio reported that the prime minister had decided to stay away after being advised by Shas leaders that he might receive a hostile reception from the crowd, as a result of his decision last week to fire the Shas ministers over their refusal to support the government's emergency economic plan.
Omri Sharon, the prime minister's son, met with Shas leader Eli Yishai in the early hours of Sunday morning in Tel Aviv, in a bid to defuse the coalition crisis.
No progress was reported at the meeting, with Sharon sticking to his demand that Shas support the plan, and Yishai insisting it will be very difficult for the party to do so if changes are not introduced, specifically regarding cuts in child allowances to those families where the father has not served in the army.
In a hand-written letter to Shas spiritual leader Rabbi Ovadia Yosef at the end of last week, Sharon wrote that Shas would have to support the economic emergency plan in its second and third readings in the Knesset and respect government decisions which it has ignored in recent months if it wanted its ministers to resume their positions in the cabinet.
The prime minister went on to write that Shas, like any other member of the coalition must execute all government decisions, and that he would then be happy to reinstate the ministers.
Sharon's confidants said over the weekend that despite the tough wording of the letter, Shas could be brought back into the government immediately if Yishai made a written commitment that the party would support the economic plan and that his faction would honor all government decisions.
However, sources in the prime minister's camp believe that Shas will prefer to sit it out until after the vote on the economic plan in the hope that negotiations with the Finance Ministry will lead to changes in the plan that it will be able to present as an achievement.