As many as 80 senior employees at Israel’s two largest banks, Hapoalim and Leumi, are threatening to leave shortly, in response to a new law capping the salaries of senior bank officers, Israel Army Radio reported Monday. The report cites a letter from the Supervisor of Banks in Israel Bank Hedva Bar to Justice Minister Ayelet Shaked (Habayit Hayehudi), which warns that as many as 215 senior bank administrators are expected to retire from the two top banks. Bar added that in the rest of Israel’s banks the numbers of departing administrators would be smaller.
So far Bank Hapoalim CEO Zion Keinan and the number two administrator at Bank Leumi Danny Tsiddon have already retired, and according to Bar there are 39 high ranking administrators at Hapolalim and 43 at Leumi who are at a very high risk of retiring.
These figures are particularly worrisome to Bar, who wrote that such mass departure could expose the banks to a real crisis — a managerial breakdown as well as a loss of knowledge and experience. The banks are preparing for such a scenario and have set aside the funds in case all these CEOs would be leaving close to one another and the banks would have to lay out their severance pay all at once — about $70 million.
Meanwhile, the banks have lost their first appeal to the Supreme Court against the salary cap law. And the Knesset, the Finance Ministry and Israel Bank have informed the court that they object to an interim ruling on the senior CEO salary cap law. The banks were asking for the time out to try to figure out whether the salary cap would include the severance and pension benefits the senior bank administrators have accumulated — would those funds also be limited to $650 thousand a year like the capped salaries? The banks fear that if the caps apply retroactively and include severance pay and pensions, a much larger number of bank officials would be seeking to leave before the law goes into effect in October.
The Knesset and the State argued in court that the banks are actually requesting the suspension of a law that otherwise passes constitutional muster in the eyes of the high court — something the court has applied on very rare occasions in the past.
The Knesset and the State also told the court that, assuming the appeal hearings would take roughly three weeks, this should be ample time for the banks to figure out the intricacies of the law and whether or not it applies retroactively.