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The History of Bank Leumi

The History of Leumi
Dr. Theodore Herzl

In 1897,an article was published in the official mouthpiece of political Zionism "Die Welt". The writer was Dr. Theodor Herzl, the founder of political Zionism, who prophesied the birth of the State of Israel. The article, titled "Jüdische Colonialbank" (translated later into "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 center. Initially, due to ideological differences, leading Jewish bankers refused to cooperate with Herzl’s plan to establish a financial institution. 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. 

Zalman David Levontin

Herzl continued to work towards the foundation of a bank in Palestine. On 27th February 1902, a subsidiary of the Jewish Colonial Trust called the "Anglo-Palestine Company" (APC) was established in London with the assistance of Zalman David Levontin, one of the first members of Hovevei Zion who had founded Rishon Le-Zion in 1882.. 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 Wolffsohn, Herzl's successor as the leader of the Zionist Movement. Its first General Manager was Zalman David Levontin.

Bank Leumi's First Branch

The opening of the Bank's first branch in Turkish Jaffa, on August 2, 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. The demand of the Turkish military governor was rejected-since 1878, all European powers were allowed to open institutions, postal authorities and banks without the need for an Ottoman license.

Interior View of Bank Leumi's first branch

The Anglo Palestinian Company 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.

Eliahu Saphir
Eliezer Ziegfried Hoofien

Following the death of Levontin's assistant, Eliahu Saphir, in 1911, 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.

Construction workers

The Bank progressed slowly but surely. It opened additional branches in: Jerusalem, Beirut, Haifa, Hebron, Safed and Tiberias. Just before the outbreak of the First World War, a branch was also opened in Gaza.That branch was closed immediately.  It also established the first cooperative agricultural societies and was instrumental in the establishment of industry and construction in Palestine.  

Bank-Issued French Franc Checks

In 1914, upon the outbreak of war, both the Jewish settlement 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, Hoofien, a neutral Dutch subject, managed to continue much of the bank’s activity while working from the Spanish Consulate in Jerusalem.

 

During the war, the Bank issued registered French Franc checks at different values. The issuing, which became a legal procedure, helped sustain the public during the harsh period of  lack of currency.

In 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 major achievements 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 and used to finance the construction of the port in 1936. At a time of severe riots, when the dockers of Jaffa port were boycotting the Jewish settlement, 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 Aharon Barth became General Manager of the Bank.

50 Pound Note, 1948

Despite the founding of the State of Israel on May 15th 1948, currency of the British Mandate 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 ordered 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.

50 Pound Note, 1952

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"  (The National Bank) was established in Tel Aviv in 1950, which on May 1, 1951 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; the bank could now concentrate its efforts into its various banking activities.