Israeli banks postpone cutting ties with Palestinian Authority

Bank Hapoalim and Israel Discount Bank are likely to postpone their decision to cut ties with the Palestinian banking system, following a request from the Bank of Israel to prevent an economic upheaval. The banks have served as correspondent banks for decades, facilitating trade worth tens of billions of shekels annually. A complete severance could paralyze trade and lead to a monetary collapse in the West Bank. The Israeli government previously approved a designated company to take over the activity, but delays have stalled its operation.

Bank Hapoalim and Israel Discount Bank, the two Israeli banks connected to the Palestinian banking system, are likely to postpone their decision to cut ties, following a request from the Bank of Israel. The central bank asked the two banks to continue providing financial services to prevent an economic upheaval. A final decision has not yet been made, but discussions are underway. The banks have served as correspondent banks for the Palestinian financial system for decades, facilitating mutual trade worth tens of billions of shekels annually. The volume of trade with the Palestinian Authority is estimated at more than NIS 20 billion a year. A complete severance could paralyze trade and lead to a monetary collapse in the West Bank. In recent years, pressure has increased on the banks to terminate the agreement due to exposure to legal and international risks related to money laundering and terrorist financing. The continuation of activity was only possible subject to letters of indemnity from the state. The Israeli government previously approved the establishment of a designated government company to take over the activity, but due to legislative and bureaucratic delays, the company has not yet begun operating. The current response was intended to buy time due to heavy international pressure, mainly from the US administration.