One of Israel’s most prominent financial institutions has been a major player on New York’s banking scene for over half a century. Now, at long last, they’re coming to Brooklyn. Israel Discount Bank of New York (IDB Bank®) is opening a branch on Avenue U, in Gravesend, a diverse neighborhood that also happens to be one of Brooklyn’s Sephardic enclaves. In anticipation of the new branch’s grand opening, scheduled for sometime between Labor Day and Rosh Hashanah, IDB of New York’s CEO, Ehud Arnon, agreed to sit down with this reporter, and Jewish Voice publisher David Ben-Hooren, at his executive office on Manhattan’s 5th Avenue. That meeting gave us the opportunity to learn all about IDB Bank’s fascinating past, and more to the point, its promising future.
Israel Discount Bank has quite an illustrious history. Founded in Tel Aviv in 1935 by prominent Greek-Jewish immigrant Leon Recanati, along with his business partners Yosef Elbaz and Moshe Carasso, the Eretz Yisrael Discount Bank, as it was called, was the first Israeli bank catering to private individuals (the other banks at that time servicing businesses and other large entities). And that personal touch is something that IDB Bank has managed to hold on to for all these years.
Today, IDB Bank Ltd. is one of Israel’s three largest banks. Its strong personal ties with the local community helped them forge bonds in Latin American countries, such that IDB Bank of New York’s subsidiary in Uruguay is the sixth largest bank in the country, where they’re called Discount Bank Latin America (DBLA). DBLA is so trusted and relied upon by the locals that the Uruguayan government’s internal revenue agency processes its employee payroll through them. In a delightful bit of irony, DBLA’s Headquarters in Montevideo are housed in what, in the years between the First and Second World Wars, was the German Embassy.
With over nine billion dollars in assets, IDB Bank’s U.S. operations are nothing to sneeze at either. One of the 15 largest banks in New York overall, it is the single largest overseas presence of any Israeli financial institution.
Even as Israel Discount Bank of New York oversees burgeoning branch operations in California and Florida (the latter a vital link to Latin America), this Israeli financial heavyweight is expanding right in our own back yard, with the much anticipated grand opening of the aforementioned Brooklyn branch just a few months away.
“Though offering some commercial services, the branch will primarily be tailored as a private banking office,” explains Arnon, “offering a high level of professional services to the local community with which we already have extensive long standing professional ties.”
The ability to connect with its client on a personal basis has long been one of the hallmarks of how IDB Bank does business. Many prominent Brooklynites believe that it is this particular strength that will allow IDB Bank of New York to thrive as it extends its local reach beyond the boroughs of Manhattan and Staten Island, where they currently have branches. All this in addition to the new Short Hills, New Jersey Branch which is scheduled to open in June.
IDB Bank’s New York presence goes back more than half a century. When it first opened an office at the landmark address at 511 Fifth Avenue, where it has been ever since, “Eleanor Roosevelt herself cut the ribbon,” says Arnon.
In discussing the recent expansion of IDB Bank’s operations in the United States, Mr. Arnon was quick to point out that, while they do enjoy strong support from within the Jewish business community, a good part of their clientele these days are, in fact, not Jewish. So why would someone without a national or cultural affinity for the Israeli-based institution do their banking with IDB? Arnon offers three reasons:
“Firstly, we have a very, very high capital ratio,” Arnon explains. “We have over 14% tier one,” referring to the IDB’s tier one, or “core capital” (essentially, a measure of a bank’s financial strength). “To be ‘well capitalized’ by American standards, you need to be over ten [percent], and from a minimal regulatory point of view you need only six. We’re at 14, which shows our core strength.” He would go on to extol IDB’s high level of liquidity and “excess of deposits,” all of which point to IDB Bank’s robust financial health.
“Secondly, the bank has never lost money throughout the financial crisis,” Arnon cheerfully reported. He explained to the Jewish Voice, with an understandable hint of pride in his voice, that IDB’s conservative lending and investment style helped keep the bank “out of trouble” as the financial world shook and rattled all around them. He referred to this conservatism as “common sense financial policy.”
“And third, in the private banking arena when you go to the big banks today, if you don’t have ten or fifteen million dollars, you get some call center someplace with a pool of bankers. With us, it’s all personal, even for much smaller amounts; you’ll get a private banker, an individual. You’ll have their telephone number, you’ll call them and they will be available. The same behavior is part of our corporate world as well. You get an individual who accompanies you in all your financial endeavors.”
“In addition to that,” Arnon continued, “you know, there is sometimes a bit of an advantage to being small. If you go to the big shops, they will tend to recommend their products. We don’t have them, so we always sell the best products of other people.”
“I don’t care if I sell you a product with Goldman [Sachs] or Merrill [Lynch] or anybody else,” explained Arnon, “and people like that. Our only consideration is what is good for the client”
In an economy where, for years, major American institutions were granting mortgages to virtually anyone who could sign their name, and other firms offered securities backed by those iffy mortgages until the whole thing collapsed like a house of cards, the common sense element of how IDB of New York operates is brought into high relief. Indeed, Mr. Arnon cited this as a prime example of the strength of Israeli-style banking. When a bank like IDB in Israel grants a mortgage, Arnon tells the Jewish Voice, it doesn’t sell it off to a third party. This vested interest in its own loans ensures a solid, stable arrangement.
Even as IDB Bank stands out in America as an Israeli institution (albeit a domestically-regulated one), it nonetheless manages to stick out among Israeli banks for being, to use the words of Mr. Arnon, “more American-oriented.”
“It’s a different mentality,” Arnon explains. “We try to function as a local bank, not a local branch of a foreign bank.”
In short, IDB Bank is at once international in its scope and domestic in its focus. Its leaders understand how to think globally, and act locally. It is in this spirit that they bring their world famous customer service to the residents of Brooklyn. And just as the Brooklyn branch will provide a new source of revenue for the IDB Bank, it will almost certainly bring a much-needed sense of financial stability to its clientele.