Prime Minister Ariel Sharon last night directed Bank of Israel Governor David Klein to prepare a report within 30 days on the events leading to the decline of
Industrial Development Bank (TASE:
The prime minister supported the treasury position in its dispute with the central bank over the arrangement to keep Industrial Development Bank afloat.
In a letter to the prime minister, bank chairman Ra'anan Cohen charged that foot-dragging by the central bank and Finance Ministry, as they feuded over the details, were responsible for exacerbating the bank's sorry condition.
Sources at a top-level meeting at Sharon's office Sunday afternoon say Sharon came down on the site of the treasury and blamed the delays in handling the crisis on the central bank. He criticized the Bank of Israel announcement last week, calling it inaccurate. "The Bank of Israel does not implement decisions - you don't know how to handle a crisis ... you are irresponsible," Sharon said.
Sharon's demand that Klein prepare a report on the chain of events is groundwork for personnel changes in Bank of Israel's Supervision of Banks division, estimate sources.
The prime minister further instructed Klein to immediately extend credit to the bank in order to keep it alive.
In a late-night telephone poll, the cabinet approved the final arrangement to keep the bank afloat, turning the arrangement into an official government resolution.
The late-afternoon meeting yesterday at Sharon's Jerusalem offices was attended by Sharon, Finance Minister Silvan Shalom, Industry and Trade Minister Dalia Itzik, Bank of Israel Governor David Klein, Supervisor of Banks Yitzhak Tal, as well as Sharon's bureau chief Dov Weisglass, Treasury Director General Ohad Marani and Accountant General Nir Gilad.
Industrial Development Bank chair Ra'anan Cohen arrived toward the end of the meeting.
Yesterday morning, 250 people arrived at the bank's only branch on Weizman Street in Tel Aviv. According to sources at the bank, all the clients withdrew their funds, even at the expense of hefty fees. According to estimates, tens of millions of shekels were withdrawn from the bank yesterday, in addition to the NIS 1.1 billion pulled out of deposits in recent weeks.
Israel's small banks reported yesterday they had seen no unusual activity following the recent "run on the bank" at Industrial Develoment Bank.
Industrial Bank is the seventh largest bank in Israel and is jointly owned, 50% by the state and 50% in shares among the three largest banks, Hapoalim, Leumi and Discount. There are fears in the banking sector and at Bank of Israel that the phenomenon of hundreds of clients arriving to withdraw deposits will fan out to other small banks.
Israel's sixth largest bank, Union Bank, said yesterday that there has been no unusual activity among its depositors. The bank's management called its branches nationwide in the past few days to examine any unusual public interest in its deposits, but was told there have been no such events.