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The History of Bank Leumi

images/BankLeumi-TelAviv-1952b

A crowd standing on line outside Bank Leumi in Tel Aviv in order to exchange the old currency notes for the new ones 10/06/1952

In the banking world, the story of Israel's Bank Leumi is quite exceptional. Few other financial institutions possess such a rich heritage as Bank Leumi, which will celebrate its centenary in the year 2002.

In 1897, an article was published in the weekly magazine of the Zionist Movement. The writer was Dr.Theodor Herzl, the founder of political Zionism who prophesied the birth of the future State of Israel. The article, titled "The Jewish Colonial Trust", argued that the Zionist Movement was badly in need of financial institutions to support the Jewish settlers in Palestine.

Herzl's financial vision began to materialize in London, the contemporary global financial centre. The capital of the newly established company amounted to 2 million Pounds - quite a fortune at the time.

Due to ideological differences, leading Jewish bankers were systematically refusing to cooperate with Herzl. In an attempt to accelerate procedures, Herzl turned to his most ardent followers- the common Jewish people who believed whole-heartedly in the Zionist idea. He put great efforts into collecting 250,000 Pounds, a minimal sum which allowed the "Jewish Colonial Trust" to launch its activities in London. In order to allow even the poorest of Jews to take part in the project, a maximum of 80 payments was allowed for each share.

At the same time, Herzl continued working ceaselessly for the foundation of a bank in Palestine. On 27th February 1902, a subsidiary of the Jewish Colonial Trust called "Anglo-Palestine Company" (APC) was established in London with the assistance of Zalman David Levontin. This company was to become the future Bank Leumi. Unlike the Trust, the Anglo-Palestine Company started out with the rather modest capital of 50,000 Pounds.

The first chairman of the Bank's Board of Directors was David Wolfson, Herzl's successor as the leader of the Zionist Movement. Its first General Manager was Zalman David Levontin.

The opening of the Bank's first branch in Turkish Jaffa on August 2nd 1903 was promptly followed by the issuing of an order by the Turkish military governor instructing that the bank should be closed on the grounds that it had no license. In reality, since 1878 all European powers were allowed to open institutions, postal authorities and banks without the need for an Ottoman license.

More branches were opened in Jerusalem, Beirut, Haifa, Hebron, Safed and Tiberias. Just before the outbreak of the First World War, a branch was also opened in Gaza. The APC was responsible for granting the necessary loans to the Achuzat Bayit Association, which made possible the development of the Jewish suburb of Jaffa, later to be renamed Tel Aviv.

Following the death of Levontin's assistant, Eliahu Saphir, in 1912, Eliezer Ziegfried Hoofien-Wolfson's financial secretary- was appointed Deputy Manager of the Bank. He was to play a major role in the development of the Bank and in the growth of Palestine's and Israel's economy until his death in 1957.

The Bank was progressing slowly but surely. It established the first cooperative agricultural societies and was instrumental in the establishment of industry and construction in Palestine.

In 1914, upon the outbreak of war, both the Jewish Yishuv and the Bank were faced with a severe crisis. A state of war had been declared between the Ottoman Empire and Great Britain & Russia, and the APC-a registered British firm-was forced to close its branches. Levontin, the Bank's General Manager and a Russian subject, who had left for Egypt just before the outbreak of war, was not allowed back into Palestine. However, the branches had only been apparently closed whereas in fact they were being run by Hoofien, a neutral Dutch subject. He was running the Bank from the Spanish Consulate in Jerusalem.

Retrospectively, the Great War was APC's finest hour. During the war, the Bank kept issuing registered French Franc checks at different values. The issuing, which became a legal procedure, helped sustain the public during the harsh period of deflation. Thus, the Bank's reputation was established for generations to come.

On 1 Jan 1925, Hoofien became sole General Manager of the Bank. During the post-war era, the Bank (now known as the Anglo- Palestine Bank) was involved in all major economic ventures in Palestine. One of the jewels in the crown was undoubtedly the establishment of the Tel Aviv port. Hoofien founded a company called "The Marine Trust", which was responsible for the issuing of shares used to finance the construction of the port in 1936. At a time of harsh riots, when the dockers of Jaffa port were boycotting the Jewish Yishuv, the opening of the new port enabled the physical and economic survival of the Jews in Palestine.

In 1947, Hoofien was appointed chairman of the Bank's Board of Directors and Aaron Barth became General Manager of the Bank.

Despite the founding of the State of Israel on May 15th 1948,  Mandatory currency was still used by the public. The Anglo- Palestine Bank was trusted with the establishment of the newly born state's monetary system. It was handling the printing of money notes in the United States, while simultaneously preparing a stock of emergency notes in Tel Aviv.

On August 16th 1948, three months after the establishment of the State, an agreement was signed between the Bank and the temporary Government. The official charter appointing the Bank as the Government's financial agent was signed by Hoofien and the Prime Minister David Ben-Gurion. On that very day, the official bank notes of the new state, bearing the name of the Anglo-Palestine Bank and the signatures of Hoofien and Barth, were distributed.

The Bank, however, was still registered in London. Since it was inconceivable that the official State Bank of Israel would remain a British firm, a company named "leumi Le'Israel" was established in Tel Aviv in 1950, which on 1.5.51 fully accepted the obligations and assets of the Bank founded in 1902.

The second series of money notes issued by the State of Israel carries the Bank's present name.

The foundation of the Bank of Israel in 1954 marked a new phase in the history of Bank Leumi, which could now resume its banking activity while re-establishing the position it has held for almost 100 years as the leading bank of the country.

Sources:
Bank Leumi
http://www.bankleumi.co.il/english/museum/hazon_finansi_en.shtml

State of Israel
National Photo Collection
http://147.237.72.31/topsrch/defaulte.htm