In 2004, a parliamentary inquiry led by MK Colette Avital (Labor) found that Leumi owed some NIS 300 million ($71.65 million) to Holocaust survivors and their families.
MK Avital found Leumi's decision 'outrageous'. "In its proposal, Bank Leumi is ignoring the law," she said.
"It is interesting that in the past the bank offered much higher sums, both to the Knesset speaker, the justice minister and the Holocaust survivors' forum. These proposals were rejected as they are inappropriate and immoral," added Avital.
The inquiry further revealed 2,500 bank accounts, apparently held by people who perished in the Holocaust.
The bank maintained that it did not hold any such funds, but agreed in 2005 to refund some of the money in exchange for immunity from further claims.
The decision, said the bank's statement, was made out of "regards to public sensitivity, and as a gesture of goodwill." The money is to be made available according to criteria set by the Association for the Restitution and Recovery of Holocaust Assets and Israeli law.
The board further decided to appoint a retired High Court justice to look into all aspects of the settlement.
"The bank will make all its resources available so the justice appointed may conclude his inspection and come up with the appropriate recommendations as soon as possible," the statement said.
"Should it be decided the bank must refund a lesser sum, we would consider the difference our donation to this worthy cause." Any liability the bank may have, added the statement, is due to revaluation of assets it no longer holds.
Despite agreeing to refund some of the money, Leumi maintained it was not holding any of the survivor's funds.
"We do not, in any way, hold funds belonging to Holocaust survivors or their heirs," said Leumi's statement. "…the bank gave all funds in the alleged accounts to the State Custodian-General's office."