Israeli financial institutions Bank Hapoalim and Discount Bank have decided to temporarily refrain from severing correspondent relations with the Palestinian Authority’s banking system.
The decision was made at the request of the Central Bank of Israel. The goal is to prevent a halt in trade operations between the sides and a resulting large-scale economic crisis.
According to reports, payments for goods and services exceeding 20 billion shekels are processed through these banks annually. A complete cessation of ties could lead to a halt in a significant portion of trade in the West Bank and trigger a severe liquidity crisis. It is reported that this situation would also negatively affect Israeli companies.
Israeli commercial banks have been demanding an end to cooperation with the Palestinian banking system for several years. The banks cite high legal risks, as well as international requirements against money laundering and financing of terrorism, as the reason.
Previously, financial institutions continued this cooperation only if there were state guarantees shielding them from legal liability. However, it is noted that uncertainty has increased in recent months due to the short-term nature of these commitments.
The Israeli government planned to transfer the management of these operations to a specially created state-owned company. This was intended to relieve private banks of legal liability. However, due to bureaucratic and legislative delays, that entity has not yet begun operations.
Source: 9tv.co.il
