Israel Pulse

Is this Israeli banking's next 'iron lady'?

Article Summary
Bank Leumi CEO Rakefet Russak-Aminoach was named one of Fortune Magazine's powerful women of 2015, though in Israel she is perceived as insensitive to social justice issues.

On the eve of Rosh Hashanah (Jewish New Year, Sept. 13), Rakefet Russak-Aminoach, president and CEO of Bank Leumi, was informed that she made Fortune magazine’s list of the 100 most powerful women in the world. At 50, Russak-Aminoach is the only Israeli on this prestigious list, which includes all the top women in the global economy, such as Facebook CEO Sheryl Sandberg and Yahoo CEO Marissa Mayer.

Russak-Aminoach’s impressive achievement received considerable attention in Israel’s financial press, which also published the explanations provided by the American magazine as to why it decided to include her on its list. It was noted, among other things, that Russak-Aminoach began building her power base at the very start of her career, while serving as personal assistant for the bank’s former CEO, Galia Maor, known as the “Iron Lady of Israeli Banking.” The magazine also noted that soon after her appointment as CEO of Bank Leumi in 2012, the bank suffered several lean years, which included a sharp decline in profits. This was coupled with a tax evasion investigation of the bank’s American clients, with Bank Leumi eventually forced to pay a $400 million fine to the US authorities. Nevertheless, Fortune Magazine also noted that by 2015, the bank seemed to be recovering, and its balance showed a significant improvement.

No one questions the fact that Russak-Aminoach is one of the most powerful women in the Israeli economy. On the other hand, while she may have made Fortune’s exclusive list, she was never really considered one of Israel’s great economic leaders or innovators. Her image is restricted to that of a “super-banker,” who has no desire to understand or maybe is incapable of understanding the social and economic changes underway among the Israeli public since the summer (social justice) protests of 2011.

The fact that Russak-Aminoach was in her 40s when she was appointed and ostensibly was one of the next generation of bank managers could have made her a trailblazer. She could have been a refreshing new face in the Israeli economy. Since her appointment, however, she has not made a single public statement driven by values. When it comes to social-public issues, she failed to create for herself any real stature. In fact, her only statements seem to focus on her direct management of the bank.

If anything, Russak-Aminoach is best remembered for a secret agreement she made with troubled business magnate Nochi Dankner, wiping out 150 million shekels (about $38.5 million) of his debt to the bank. It happened in 2013. A photo of Russak-Aminoach sitting with Dankner in a cafe for a casual meeting was published by the Israeli business magazine The Marker. The image quickly went viral, accompanied by a resounding public outcry. People demanded to know how the bank could get away with absolving Dankner of his enormous liabilities, while the average citizen was hounded to death for even the most insignificant debt. 

As the crisis reached its climax, Knesset member Shelly Yachimovich (now of the Zionist Camp) called for a boycott of the bank if the agreement wasn’t nixed. It took a long time before Russak-Aminoach recognized the extent of the crisis and withdrew from the agreement, and by then it was too late. The damage had been done, both to her reputation and that of her bank.

The fact is that Russak-Aminoach never really believed that she made a mistake. In an arrogant, detached interview she gave in April 2014 to journalist Ilana Dayan on the news show Uvda (Channel 2), she actually defended her decision and argued that the public was mistaken. What anyone watching the show saw was a very successful, well-spoken, intelligent woman, appearing boldly before the cameras on prime time. What they also saw was someone who had absolutely no clue about what is wrong with her enormous salary (7.2 million shekels in 2014 — about $1.8 million) at a time when the public was particularly sensitive about how the banks are run in general, and their steep commissions in particular.

But the most significant point that must be raised here is the scandal of centralized banking in Israel. It is one of the main factors behind the high cost of living, which brought the public to the streets and continues to be a major cause of concern. According to figures recently provided by Finance Minister Moshe Kahlon, if the banks make the reforms necessary to bring about real competition, every family in Israel would save 3,000 shekels per year (about $770). Over four years have passed since the 2011 social protests. The public, which is also the majority stockholder in the banks, and which pours billions of shekels into the banking industry through the commissions and interest it pays, is fully aware of this anomaly, and it wants to see a change.

One of the reasons that Kahlon and the Kulanu Party were so successful in the March 17 election was Kahlon’s plan to introduce competition into the banking system. But for now, his proposed reforms are stuck. The heads of all the major banks, including Russak-Aminoach, are pouring everything they have into the fight to block the reforms and keep their vast profits. Nevertheless, anyone who continues to follow the impact of the social protests realizes that it is only a matter of time until cracks begin to appear in the centralized banking structure. It may take a few years, but the writing is on the wall. In that sense, Russak-Aminoach could have been a trailblazer if she would have gone along with this trend and generated moral statements. But she isn’t. In fact, she isn’t even close to going along with it. She regards her position as that of gatekeeper for the Old Order, and she considers herself a member of a very exclusive club, made up of the country’s financial elites such as billionaire Idan Ofer and Zehavit Cohen, CEO of the private equity firm Apax Partners Israel.

When it comes to her salary, Russak-Aminoach could also show a more inspirational approach. While proposals to limit the salaries of top earners are still bogged down in the legislative mire, she could earn her place in posterity by spearheading real change. When the Finance Ministry’s accountant general, Michal Abadi-Boiangiu, suggested to her that she not wait for the legislation to pass and that she take the initiative by cutting her salary, Russak-Aminoach ignored the proposition. While she is hardly the only person to benefit from an enormous salary funded by excessive commissions and interest rates, if Russak-Aminoach was really sensitive to the mood bubbling beneath the surface of the Israeli public, she might think outside the box and bring about real changes to the banking industry.

Russak-Aminoach also made headlines when she asked for a restraining order against attorney Barak Cohen. Cohen, who has been fighting with the banks because of a personal debt, claims that the banks are acting like thieves and harassing the average citizen. As part of his well-publicized struggle, he stalked Russak-Aminoach’s daughters at school, shouting at them that their mother is a thief who abuses hundreds of thousands of children. Russak-Aminoach won that fight at least. The courts issued a restraining order against Cohen. The struggle for the protection of her children improved somewhat her public image of being a detached and cold person. It was recently reported that Russak-Aminoach replaced her public relations consultant. We can only hope that in the coming year, she will take advantage of the honor bestowed upon her by Fortune magazine to justify her new status and bring about real change. This would be far preferable to defending the Old Order, which will be dismantled anyway, sooner or later. 

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Found in: social protest, social justice, reforms, moshe kahlon, israeli economy, centralized banking, banking

Mazal Mualem is a columnist for Al-Monitor's Israel Pulse and formerly the senior political correspondent for Maariv and Haaretz. She also presents a weekly TV show covering social issues on the Knesset channel. On Twitter: @mazalm3

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