Treasury postpones Leumi privatization

This means the prime minister and finance minister will pick the next Leumi chairman.

The privatization of Bank Leumi (TASE: LUMI) will only take place in the second half of 2010. The Ministry of Finance has decided to sell the state's shares in the bank only after the Knesset amends the "Marani law" in the Banking Ordinance, named after former Ministry of Finance director-general Ohad Marani. Consequently, the state will not sell its shares in the bank, held through MI Holdings (State of Israel Properties), before July 2010.

This means that Prime Minister Benjamin Netanyahu and Minister of Finance Yuval Steinitz will pick Bank Leumi's next chairman, after the term of current chairman, Eitan Raff (68) expires in May. Raff has served as chairman since 1995. One of the leading candidates to replace him is former Governor of the Bank of Israel Jacob Frenkel. However, Raff may be asked to stay on until the privatization of Bank Leumi is completed.

Accountant General Shuki Oren, who is chairman of MI Holdings, is handling the sale, together with Steinitz.

A senior source at the Ministry of Finance said that the reason for delaying the privatization of Bank Leumi until after the Marani law is amended is to "ensure continuity in the bank's management. We mustn’t reach a situation that could result in a failure at Bank Leumi's board of directors."

Sources inform ''Globes'', however, that the Bank of Israel recently informed the Ministry of Finance that there no reason not to privatize Bank Leumi simultaneously with approving the amendment to the Banking Ordinance, and that it was not necessary to postpone the sale of the state's shares.

In recent months, both the Bank of Israel and the Ministry of Finance have been discussing amending the Marani law. A draft is due in January 2010 in the hope that the Knesset will pass the amendment during the winter session.

Marani chaired the committee that drafted the proposed amendment to the Banking Ordinance in 2004. The objective is to solve the problem of control of a bank that does not have a controlling core. Under these circumstances, the power to elect the bank's board of directors is with the shareholders, who, at general shareholder meetings, vote on the proposed list of candidates for directors.

The proposed amendment will change how a bank's directors are appointed, and prevent a situation in which a general shareholders meeting does not elect any director. The amendment is intended to allay the Bank of Israel's concerns about the functioning of a bank's board of directors, and to prevent its paralysis if there is no controlling core.

Bank Leumi has a market cap of NIS 22.47 billion, after its share rose 93% since the beginning of the year. MI Holdings owns 10.3% of the bank, in addition to 1.1% of the shares that will be allotted to the bank's employees when the privatization is completed. The Ministry of Finance hopes to make NIS 2.3 billion from the sale of its shares in the bank.

Bank Leumi's share fell 0.3% by midday today to NIS 15.20.

Published by Globes [online], Israel business news - www.globes-online.com - on November 22, 2009

© Copyright of Globes Publisher Itonut (1983) Ltd. 2009

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