Former senior executives at Bank Leumi may have to return several years of bonuses in the wake of the bank being subject to a huge fine from U.S. tax authorities, Israel’s banking watchdog said on Thursday.
The watchdog, part of the Bank of Israel, in a report published on Thursday criticized Leumi, Israel’s second-largest lender, for negligence in its corporate governance between 2007 and 2011.
Leumi in December agreed to pay $400 million to settle two separate investigations into whether it helped American clients, largely in its Swiss unit, evade taxes.
The regulator said Leumi did not recognize and react in time to the risks involved with its U.S. clients, especially following a fine paid by Swiss bank UBS to U.S. authorities.
Leumi rejected the report, saying the banking system as a whole had misunderstood the severity of the issues and that even lawyers it had hired did not fully understand the risks.
But the regulator demanded Leumi set up an independent committee to examine the conduct of its board and senior officers from 2008-2010.
It also said Leumi must “outline a recalculation of the bonus money paid to officers on the basis of its [the committee’s] findings,” referring mainly to the chairman, chief executive and head of its international private banking division.
It did not name the individuals concerned but the CEO at the time was Galia Maor, the chairman was Eitan Raff and Zvi Itskovich was private banking head.