Israel to end Palestinian banking ties, raising economic crisis for Palestinians
Palestinian officials warn the move could disrupt trade, government finances and economic stability across the occupied West Bank
JERUSALEM, Palestine (MNTV) — Two major Israeli banks plan to end correspondent banking relationships with Palestinian financial institutions in the coming months, prompting warnings from Palestinian officials that the move could trigger a severe economic crisis in the occupied West Bank.
Israeli officials said Israel Discount Bank intends to end the banking relationship on Sept. 1, while Bank Hapoalim is expected to follow on Oct. 1. The two lenders provide key financial channels that enable transactions between Israeli and Palestinian banks.
The planned move comes amid continued tensions surrounding the genocide in Gaza and hostile behavior of Israel’s government towards Palestinian people.
Israeli Finance Minister Bezalel Smotrich has repeatedly withheld portions of Palestinian tax revenues collected by Israel and questioned the Palestinian Authority’s legitimacy, further straining financial cooperation.
Palestinian Monetary Authority Governor Yahya Shunnar warned diplomats in Ramallah that severing banking ties would have serious economic consequences.
“These channels are a cornerstone of the infrastructure that underpins our trade, our commerce, our government operations, and the livelihoods of millions,” Shunnar said, adding that their disruption would affect Palestinians, Israelis and broader regional stability.
Israel’s Finance Ministry acknowledged that ending correspondent banking arrangements could undermine regional economic stability and increase the risk of transactions shifting into unregulated cash-based channels.
However, it said Israeli banks face heightened legal and financial risks because of allegations related to terrorism financing and money laundering involving the Palestinian Authority.
The Palestinian Monetary Authority rejected those concerns, saying it has spent the past decade strengthening its anti-money laundering and counterterrorism financing systems to meet international standards.
Shunnar said assessments by the United States and the United Kingdom found the authority’s financial safeguards meet or exceed global benchmarks.
According to the Palestinian Monetary Authority, the two Israeli banks process approximately 51 billion shekels (about $16.6 billion) in annual transactions linked to the Palestinian economy.
Around 90% of Palestinian imports, including food, fuel and medicines, pass through Israel, making the banking relationship vital to maintaining trade and supply chains.
Israeli officials said the issue is also linked to a temporary government waiver that protects Israeli banks handling shekel transactions with Palestinian institutions from legal liability.
The current waiver remains in effect until the end of the year, but banks have called for a permanent legal framework, citing uncertainty over future renewals.
Israel Discount Bank said it has provided the services on a temporary basis for years while awaiting a long-term solution.
Bank Hapoalim said the matter remains under review, while Israel’s Finance Ministry said it is working with both lenders to ensure banking services can continue in a manner that protects Israel’s security and economic interests.
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