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Bank Leumi Freezes Erasure of Tycoon's Debt

Public pressure causes Bank Leumi to announce that the deal to erase most of tycoon Nochi Dankner's debt has been frozen.
By Elad Benari
First Publish: 4/18/2013, 5:43 AM

Bank Leumi
Bank Leumi
courtesy

Bank Leumi announced Wednesday evening it would freeze the deal with businessman Nochi Dankner which would have seen the bank erasing most of Dankner’s debt.

The bank announced in a statement that the agreement would be put on hold until the Supervisor of Banks concludes an inquiry he started in the case.

Bank Leumi noted that it cannot reveal to the public all the considerations that guided it in formulating the agreement with Dankner, but added that the agreement was the best solution that would see Dankner return some of his debt to the bank.

According to the agreement, Bank Leumi intends to erase 150 million shekels of the debt owed by one of Dankner's companies.

It is speculated that public pressure caused the bank to announce that the agreement would be frozen. Israelis expressed outrage over the agreement on Wednesday, and Opposition leader MK Shelly Yechimovich wrote a letter to David Zaken, who is responsible for oversight of Israel’s banks, calling on him to nix the planned debt erasure.

Dankner’s debts through his various companies are approaching a total of one billion shekels, she said. “Given the situation, there is reason to fear that forgiving his debts could hurt banks’ financial stability,” she argued. The decision “would be a dangerous precedent… with implications for the entire banking system,” she warned.

“I am convinced that Bank Leumi’s decision is connected to the issue of centralization of accounting services,” she continued. “I have warned you about this multiple times in the past, and do so again: Gad Somech serves as both the accountant for the IDB group [owned by Dankner] and for Bank Leumi (and most of the other banks), to which the group owes money.”

Somech’s dual roles “give real cause for concern… that it will prevent him from adequately assessing the financial risks and risks to stability posed by the chairman’s decision to erase debts of customers he does the accounting for,” she explained.

Yechimovich also gave an interview to Army Radio on Wednesday in which she called on customers of Bank Leumi to close their accounts with the bank, if it pursues the agreement with Dankner.

"I call on significant and also on smaller customers of Bank Leumi to inform the bank that if it intends to erase Dankner’s debt, they will close their accounts with it,” she said.

MK Dov Khenin (Hadash) welcomed Bank Leumi’s announcement regarding the freezing of the agreement with Dankner and said, “Once again we see that a public campaign can succeed. The public today no longer agrees to see different laws for tycoons. Social justice must include not only solutions for the disadvantaged, but also serious treatment of the privileges of the wealthy.”