The Finance Ministry and the Bank of Israel acted today to prevent the United Mizrachi Bank from buying the privately owned First International Bank of Israel (FIBI). The Mizrachi Bank, which is owned by the National Religious Party, promptly accused the Treasury of political motives.
The Mizrachi Bank planned to float a $100 million stock issue to finance the $150 million purchase price but, at the last minute, it was denied a license. Interior Minister Yosef Burg, an NRP leader, said he was “extremely angry” and threatened that “the forces who are pulling the strings against the Mizrachi Bank” will soon be exposed. The purchase would have made the Mizrachi Bank the fourth largest in Israel. Finance Minister Yoram Aridor and Moshe Mandelbaum, Governor of the Bank of Israel, Israel’s equivalent of the Federal Reserve Bank in the U.S., denied vehemently that politics were involved. They were joined by Deputy Premier Simcha Ehrlich, a former Finance Minister, who said it was unhealthy for a bank to float such a large stock issue to buy a competitor.
Financial leaders suggested that the purchase would concentrate Israel’s banking business in too few hands. Burg replied that the Mizrachi Bank and the FIBI combined would not control more than 10 percent of the business compared to the Bank Leumi, the Israel Discount Bank and the Bank Hapoalim which each control more than 25 percent.
One of the main arguments against the purchase was that the Danot group of local industrialists who bought the FIBI for only $25 million two years ago, stood to make a huge profit on the deal. Ehrlich, noting that “the industrialists are all good friends of mine,” said they should stick to manufacturing for the economic and social good of the country, “not spend their time buying and selling banks to make quick profits.”
A Mizrachi Bank spokesman said if the purchase went through, the FIBI would continue to operate as an independent bank and would even be allowed to keep its automatic tellers open on the Sabbath. The Orthodox-controlled Mizrachi Bank shuts down completely on the Sabbath.
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