US Treasury Secretary Janet Yellen and 7 of her counterparts from America's allies sent a letter to Israeli Prime Minister Benjamin Netanyahu warning him that his far-right Finance Minister Bezalel Smotrich may be on the verge of causing the collapse of the Palestinian economy.

According to the Axios website, which reviewed the letter, the ministers expressed their countries' concern that the collapse of the banking system in the West Bank would have serious repercussions, including the fall of the Palestinian Authority and a security crisis threatening Israel.

The ministers fear that Smotrich will not allow the extension of the financial correspondence agreement between Israeli banks and the West Bank, which expires at the end of this month, as without that correspondence the Palestinian banking system could collapse.

In addition to Yellen, the letter was signed by her counterparts from Japan, Canada, the European Union, the United Kingdom, the Netherlands, Australia and France on October 25.

The letter stressed that the continuation of relations between Israeli and Palestinian banks is necessary "so that vital financial transactions, trade and essential services can continue."

The letter also called for the release of all pending tax revenues and their full transfer to the Palestinian Authority, as well as the reissuance of permits for Palestinian workers where security conditions permit.

According to the website, the Israeli Treasury and Netanyahu's office did not immediately respond to questions raised in the letter.

Smotrich, one of the most extreme politicians in the Israeli government, has made a number of demands to Palestinian banks to prevent illicit financing "related to financing the families of Palestinian martyrs and prisoners."

The administration of US President Joe Biden informed Israel last week that it had determined that Palestinian banks had met the conditions set by Smotrich.

The Israeli security cabinet is likely to discuss the issue at a meeting on Sunday evening.

On Friday, the finance ministers and central bankers of the G7 countries concluded their meetings in Washington.

Source: Axios + Al Jazeera