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UPDATE 1-Israel's Bank Leumi CEO to resign after seven years

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TEL AVIV, June 30 (Reuters) - Bank Leumi said on Sunday its Chief Executive Rakefet Russak-Aminoach will step down in the coming months after seven years as head of Israel's biggest bank by market capitalisation.

Russak-Aminoach, who joined Leumi in 2004 as head of the business division, did not provide a reason for her decision in a letter to the bank's chairman, David Brodet.

"I have decided the time has come to leave my post," she said in the letter.

Leumi said Russak-Aminoach's resignation would take effect after the bank's board chooses a replacement for her.

Russak-Aminoach said she decided to announce her decision before the board chooses a new chairman to replace Brodet, who is leaving Leumi after nine years. The board is due to meet on Sunday to name a new chairman.

Leumi shares were down 1.2% in early trade.

Under Russak-Aminoach's leadership Leumi was the first of Israel's banks to reach a settlement with U.S. authorities following an investigation into tax evasion by its U.S. clients, agreeing to pay a $400 million fine.

Leumi's chief rival, Hapoalim, is still seeking to reach a final settlement in a similar inquiry.

Hapoalim is also seeking a new CEO after Arik Pinto said he plans to step down at the end of 2019.

Israel Discount Bank, the country's fourth largest lender, is also searching for a new CEO after Lilach Asher-Topilsky announced earlier this month she would step down to become a partner at the FIMI Fund.

In 2016, Israel passed a law capping bank executive compensation at 2.5 million shekels ($700,908) a year. Before this came into effect, remuneration for senior banks had risen to as much as 8 million shekels a year. ($1 = 3.5668 shekels) (Reporting by Tova Cohen Editing by Steven Scheer and Alexander Smith)