As Frenkel bows out of bid for Bank of Israel chief, will first woman be appointed?

Professor Jacob Frenkel, the leading nominee for the position of Bank of Israel governor, informed Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid Monday that he is withdrawing from the race in wake of what has been dubbed the "perfume affair."

Netanyahu and Lapid are likely to announce a new candidate for the position within a few days. The leading candidate is Deputy Bank of Israel Governor Dr. Karnit Flug, who was endorsed for the position by former Governor Stanley Fischer, and currently serves as the central bank's acting chief.

The short list also includes Bank Hapoalim Chief Economist Leo Leiderman, former Finance Ministry Director-General Avi Ben-Bassat, former head of the government’s committee for social reform Professor Manuel Trajtenberg and Professor Daniel Tsiddon, who currently serves as head of Bank Leumi's Investment Markets Division and is also a member of the bank's board of directors.

Frenkel, whose confirmation process before the Public Service Nominations Committee has been underway for the past five weeks, has been embroiled in a shoplifting scandal which allegedly took place at the duty free shop at a Hong Kong airport in 2006.

He has vehemently denied the allegations and claimed the matter was rooted in an unfortunate misunderstanding, adding he had documents supporting his version of the events from Hong Kong authorities.

In a Channel 2 interview, Frenkel -- who served as Israel's central bank chief between 1991 and 2000 -- addressed the scandal for the first time, saying, "From the moment my nomination was announced my name has been dragged through the mud … I have to say that this entire affair has been very shameful, excuse me, very embarrassing, and it should never have happened. After a swift investigation, [Hong Kong] authorities were satisfied that this was nothing more than a basic misunderstanding."

Despite the interviewers' prodding, Frenkel provided only vague details about the affair, saying, "When I was at the airport, I stopped by the duty free shop and they thought I left with a garment bag I supposedly didn’t pay for. I had asked a colleague of mine to pay for it. When she came to me and told me what happened, she was mortified. I ended up having to console her. The point is that when she came forward and recounted the events, authorities were satisfied that this was a misunderstanding."

The former bank chief, who was visibly upset during the interview, stressed that he had agreed to take office as bank governor for the third time only after he was beseeched by Netanyahu. "From the moment it was announced, the damn broke. I was the subject of public mud-slinging, slander and numerous attempts to sully my good name. Maybe they were taking their anger at some other political figure out on me."

Frenkel, who is a world renowned economist, added that he had cooperated in full with the Public Service Nominations Committee's proceeding, saying he remained mum on the matter until Monday out of respect for the committee's work.

"What happened here is that with unbearable and intolerable ease a person is virtually burned at the stake and his reputation slandered, based on nothing but speculations. I was the subject of a delegitimization campaign both personally and professionally. My integrity was questioned and my reputation was damaged."

A source in Attorney-General Yehuda Weinstein's office told Israel Hayom that Weinstein's and the senior members of the State Prosecutor's Office were still gathering information on the case when Frenkel announced he was withdrawing his candidacy.

"We asked Hong Kong authorities for their records, which involved Frenkel waiving his rights to confidentiality on the matter, but no one in the [Attorney-General's] Office said anything to him or even hinted that he should decline the position," the source stressed.

Netanyahu and Lapid issued a joint statement on Monday night, following Frenkel's announcement: "We regret Professor Frenkel's decision, which is a direct product of the current [media] climate, where a man is slandered and has no right to defend himself. Professor Frenkel's record speaks for itself. He was an exemplary Bank of Israel governor and he would have done a great service to the State of Israel at a time of a global financial crisis. The current climate practically guarantees that no one will seek public service."

In a post on his Facebook page, Lapid added: "What a huge miss. Frenkel could have been exactly what we needed. If our public discourse continues to be so violent and disrespectful, we'll never be able to get anyone to contribute to the country. What a shame."

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