Israeli Banks Set to End Correspondent Services to Palestinian Lenders, Raising West Bank Economic Alarm

Israeli Discount Bank announced it will cease all correspondent-banking relationships with Palestinian banks on September 1. Bank Hapoalim will follow on October 1. Together the two banks process roughly NIS 51 billion ($16 billion) in Palestinian transactions each year, covering most imports, wage transfers and utility payments. Some officials also cite an earlier August 13 deadline for five banks that rely on Hapoalim, underscoring uncertainty over the rollout.

Israeli banks to cut ties with Palestinian counterparts: officials

The links operate under a waiver signed by Finance Minister Bezalel Smotrich that shields Israeli banks from liability for money-laundering or terrorist-financing accusations when handling shekel payments for the Palestinian Authority (PA). The waiver, renewed every six months, expires at the end of the calendar year. Since the October 2023 Gaza war, Israel has withheld tax revenues collected on the PA’s behalf and limited work permits for Palestinian laborers, deepening fiscal strain in the West Bank. Israeli officials argue that the PA’s “financing terrorism” creates a “severe risk environment” for the banks.

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• NIS 51 billion in annual transactions processed by Discount Bank and Hapoalim (Yahya Shunnar, governor of the Palestinian Monetary Authority).

Times of Israel

• About 90 % of Palestinian trade, including food, fuel and medicines, passes through Israel.

Associated Press

• The West Bank banking system holds an estimated 30 billion shekels in physical cash, exceeding the Israeli cash-transfer limit of 18 billion shekels per year.

Associated Press

• Bank Hapoalim said the matter “is currently under review.”

UsNews and World Report

• The U.S. Treasury has previously urged Israel to maintain banking ties to avert a regional economic crisis.

UsNews and World Report

• Maher al-Masri, chairman of the Association of Banks in Palestine, warned that a shift to cash could expand the informal economy and trigger a banking crisis.

Times of Israel

• Adel al-Sharkas, governor of the Central Bank of Jordan, noted that Jordanian banks holding shekel balances would be unable to transfer or sell those funds if the links are cut.

Times of Israel

• Palestinian officials have appealed to the United Nations, World Bank and IMF, describing the situation as a “commercial blockade” that could halt the West Bank’s financial system.

New York Times

• Cutoff dates differ: Reuters cites September 1 and October 1, while an AFP source mentions an August 13 deadline for Hapoalim-linked banks.

Israeli banks to cut ties with Palestinian counterparts: officials

• The waiver’s expiration is described as “end of this year” in some outlets, yet other statements suggest uncertainty about a permanent solution.

UsNews and World Report

• Cash-surplus figures range from “30 billion shekels” to “more than 30 billion,” without an independently verified audit.

Associated Press

• “At the same time, in light of the increasing risks associated with providing these services, and given our responsibility to our depositors and shareholders, we brought our concerns to the attention of the relevant authorities.” — Bank Hapoalim

UsNews and World Report

• “This is not a slope, it’s a cliff,” — Yahya Shunnar, monetary authority governor

Times of Israel