TEL AVIV (Jan. 24)
The Bank of Israel announced last night that it had taken over the management of two old, privately-owned Israeli financial institutions, Bank Feuchtwanger and Bank Ellern, both of which have been under a single management since Feuchtwanger took over Ellern recently. The Bank of Israel, a state institution, announced it had taken over all the obligations of the two smaller banks, domestic and foreign.
The two banks, founded in the 30’s during the beginning of the influx of German Jewish immigration into Israel, have total assets of 200, 000, 000 Israeli pounds ($66, 660, 000), of which 130,000, 000 pounds (over $43, 000, 000) is in foreign currency. All of the foreign currency held by the two banks is on deposit in the Bank of Israel, thus being fully guaranteed. The banks conduct 5.1 percent of Israel’s banking.
A spokesman for the Bank of Israel stated that a routine check of the conduct of the two banks had disclosed that “some of the shareholders of Bank Feuchtwanger received exaggerated credit, either in cash or through bank guarantees, thus endangering the financial position of both banks.”
For that reason, the state bank stated, a new management has been appointed for both banks and the spokesman said that the Bank of Israel is backing “all liabilities, thus no one will suffer.” It was also announced that the single board of directors for both institutions had resigned.
The announcement was made at 10 o’clock last night, so as to minimize chances for financial panic and of a run on the two banks. Their major offices are in Tel Aviv, but the institutions have branches throughout Israel.
During the night and early morning hours, armored cars rushed huge sums of cash to all banks throughout Israel to meet any possibilities of mass withdrawals. However there was no panic, even at the two banks affected. The Tel Aviv offices of both banks opened on time this morning. While the number of withdrawals was said to be larger than usual, it was noted also that many people were depositing money in both institutions.
The bank’s board of directors resigned voluntarily. However, Israel’s Commissioner of Banks reported the entire development to the Attorney General who has said he will probe into the operations of the banks “to see whether there are grounds for an investigation into their activities.” Financial circles, led by David Horowitz, Governor of the Bank of Israel, emphasized today that both banks are now as safe regarding deposits and liabilities as any bank in Israel.