Israeli banks to cut correspondent services with Palestinian banks

Israel Discount Bank announced it will cease correspondent banking services for Palestinian banks on 1 September, with Bank Hapoalim following in early October (AFP reports Hapoalim will stop on 13 August). The two banks handle the bulk of payments that finance Palestinian imports of electricity, water, fuel and food, as well as wages earned by Palestinians working in Israel. Governor Yahya Shunnar of the Palestinian Monetary Authority warned that “these channels are a cornerstone of the infrastructure that underpins our trade, commerce, government operations and the livelihoods of millions,” and said their loss would trigger a severe economic and humanitarian crisis in the West Bank. He noted that 90 % of Palestinian exports and all essential imports move through Israel, amounting to about 51 billion shekels (≈ 16.5 billion USD) in 2025. Israeli Finance Minister Bezalel Smotrich has repeatedly withheld tax revenues collected on behalf of the Palestinian Authority, heightening tension. Officials said the move is driven by concerns over money‑laundering and terrorist‑financing risks, but analysts caution that cutting the links could push transactions into informal cash channels, worsen inflation and destabilise the region.