Shock waves from the October 1983 bank shares scandal reverberated anew in the financial community Sunday, when Finance Minister Moshe Nissim questioned the value of the Bank Leumi’s collateral on a government loan.
Bank Leumi and four other of Israel’s largest banks were bailed out by the Treasury nearly five years ago after their shares, a favorite saving instrument of the public, collapsed on the Tel Aviv stock exchange. The government was forced to step in to guarantee the shares.
Part of the arrangement was a freeze on the Bank Leumi shares. The government agreed to make the sums available for their repurchase by the bank in 1988.
The redemption date fell due several months ago and the Treasury provided the money in the form of a loan secured by the shares.
But the usually mild-mannered Nissim sent a scathing letter Sunday to the Bank Leumi directorate questioning its good judgment and hence the value of the shares.
Nissim’s wrath was directed at the huge emoluments paid by the bank to 23 senior executives who were forced to resign in the wake of the 1983 scandal, notably Ernst Japhet, former board chairman and chief executive officer.
The present board of directors supposedly reduced the severance payments voted Japhet and others by its predecessor.
But one of the board members, Professor Shimon Shetreet, disclosed last week that it in fact had not.
The payments, including pensions, amount to about $75 million, which Nissim called outrageous and a danger to the value of the bank’s securities. He demanded that the board cancel the severance agreements and renegotiate them.
JTA has documented Jewish history in real-time for over a century. Keep our journalism strong by joining us in supporting independent, award-winning reporting.
The Archive of the Jewish Telegraphic Agency includes articles published from 1923 to 2008. Archive stories reflect the journalistic standards and practices of the time they were published.
