Informed sources revealed that major Israeli banks are moving to terminate correspondent banking relationships with Palestinian financial institutions in the coming months, a step that threatens to deepen the economic crisis in the Palestinian territories. According to officials, 'Discount Bank' intends to cut its ties on September 1st, followed by 'Bank Hapoalim' in early October, justifying this with legal concerns related to terrorism financing and money laundering in the absence of a sustainable Israeli government solution.
Governor of the Palestinian Monetary Authority, Yahya Shanar, warned of catastrophic repercussions of this decision, noting that the two banks manage financial transfers estimated at about 51 billion shekels ($16.6 billion) annually. Shanar explained that 90% of Palestinian trade, which includes essential goods such as food, fuel, and medicine, relies entirely on these banking channels passing through Israel, stressing that their disruption will lead to the collapse of supply chains and paralysis of government operations.
These developments come amid pressure exerted by Israeli Finance Minister Bezalel Smotrich, who controls the tax and banking exemption mechanism. Despite international assurances from the United States and Britain that the Palestinian financial system complies with international standards for combating money laundering, Israeli banks express concern about exposure to international lawsuits unless permanent legal guarantees are provided by the Israeli government, which puts the Palestinian economy before its toughest test in decades.
These channels are a cornerstone of the infrastructure that supports our trade, business sector, and the livelihoods of millions, and their disruption will have severe consequences for the entire region.
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Warnings of Palestinian economic collapse as Israeli banks move to cut banking ties