Israeli banks have informed their Palestinian counterparts that they intend to end critical banking services within weeks, Palestinian and Israeli officials say, raising fears of an economic crisis in the West Bank.
These banking links are essential for financing exports from Israel to the Palestinian Authority, including electricity, water, fuel and food, as well as for transferring wages earned by Palestinians working in Israel.
“This is not simply a technical banking matter. These channels are a cornerstone of the infrastructure that underpins our trade, our commerce, and the daily life of millions of people,” PA Monetary Authority governor Yahya Shunnar tells journalists at a briefing in Ramallah.
Five Palestinian banks that rely on Israel’s Bank Hapoalim for correspondent banking services will lose access on October 1, Shunnar says.
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Palestinian banks working through Discount Bank face a September 1 cutoff.
Together, the two Israeli banks process NIS 51 billion ($ 16.5 billion) in Palestinian transactions annually, including for the 90 percent of Palestinian exports that go through Israel, Shunnar says.
Should correspondent payments end, Shunnar warns, the entire financial system would come to a halt, dragging with it trade and prices for consumer items.
“This is not a slope, it’s a cliff,” Shunnar says.
The chairman of the Association of Banks in Palestine, Maher al-Masri, warns that severing these banking ties could force more transactions into cash, increasing the risk of a banking crisis and expanding the informal economy.
Central Bank of Jordan governor Adel al-Sharkas says that his country’s banks, which conduct business in the Palestinian territories, are also exposed.
“If this link (between Israeli and Palestinian banks) is stopped… our banks find themselves holding a large shekel balance that cannot be transferred or sold,” he says.