The United States on Monday welcomed the Israeli government's decision to approve a one-year extension of its compensation to Israeli banks, which supports correspondent banking relations between Israeli and Palestinian banks.

Economic stability in the West Bank is "critical to security on both the Israeli and Palestinian sides," a joint statement by the US State Department and Treasury said Monday.

The statement, a copy of which was received by Jerusalem, said: “The United States welcomes the decision of the Government of Israel to approve a one-year extension of its compensation to Israeli banks, which supports correspondent banking relationships with their Palestinian counterparts. Economic stability in the West Bank is essential to Israeli and Palestinian security, and correspondent banking is a fundamental pillar of that economic stability. The United States appreciates continued cooperation with the Government of Israel and the Palestinian Monetary Authority on this issue.”

State Department spokesman Matthew Miller expressed his relief at the decision, but also some frustration with the Israeli actions, noting: “We had extensive discussions with the government of Israel about the intent to extend this correspondent banking agreement, and the discussions were longer and more intensive than they should have been.”

“Clearly, canceling this agreement would have had disastrous consequences for the Palestinians in the West Bank, but the point we have been making to the government of Israel is that it would have had disastrous consequences for the Israeli public as well,” Miller explained. “It is not in Israel’s interest to see further instability in the West Bank. It is not in Israel’s interest to see the West Bank economy collapse. So it is very disappointing that it has taken this long to convince the government of Israel to extend this agreement for a year, which it should have done through normal business without any intensive diplomatic efforts by the United States.”

Spokesman Miller denied that there was a deal in exchange for this resolution, in which the United States pledged to Finance Minister Smotrich to use its veto in the UN Security Council against any draft resolution in the Security Council to cease fire in Gaza, saying: “Now, having said this, with regard to the UN Security Council, we will continue to look at every resolution that comes before the UN Security Council, and judge whether a yes vote, a no vote, or an abstention vote is in the interest of the United States, and we will make our judgments on that basis and nothing else.”