Israeli Banks Turn to High Court in Bid to Protect Pensionsby
Association of Banks seeks injunction after lobbying fails
New laws capping pay threatens to cause exodus of managers
The umbrella group for Israeli banks filed an appeal against a law to cap executive pay to the High Court, a last ditch effort to block legislation that may cause an exodus of top managers.
The Association of Banks in Israel is seeking a temporary injunction “to avoid a situation in which workers choose to resign just because of the fear that their rights upon retirement will be hurt if they wait until the appeal is decided,” the organization said in an e-mailed statement on Wednesday. A finance committee spokesman was not immediately available to comment.
The legal action comes after attempts to lobby lawmakers failed, with the fight now turning to change a section of the rules affecting pension plans. In terms of the legislation, due to be implemented in October, retirement packages will be confined to a maximum of 2.5 million shekels ($649,000), meaning that managers are at risk of losing millions in savings. It will also limit individual salaries.
The changes come as the nation’s biggest lenders already grapple with a shrinking industry and demands from the Bank of Israel that they devise plans by the end of the year to improve efficiencies, risking thousands of jobs.
Bank Leumi Le Israel Ltd., Israel’s second-biggest lender, has drafted a five-year plan to cut more than 10 percent of its workforce, a person with knowledge of the matter said last week. Leumi has presented a program to the Bank of Israel, which has not yet been approved by its board.
Zion Kenan announced that he will be leaving as chief executive officer of Bank Hapoalim Ltd., the country’s biggest lender, after the law was passed by the government in March. Daniel Tsiddon, Leumi’s deputy CEO, has also tendered his resignation.
The severity of a "brain drain" that will follow once the laws come into effect will depend on whether a solution is found that will at least protect the past rights that people accumulated over the years, Tsiddon said during Leumi’s earnings call on May 19. "If that is being resolved, the impact, if it comes, will be over the years and not an immediate one."