Financing the Israeli Occupation
The Direct Involvement of Israeli Banks in Illegal Israeli Settlement Activity and Control over the Palestinian Banking Market
Who Profits from the Occupation, October 2010
Israeli banks provide the financial infrastructure for all activities of companies, governmental agencies and individuals in the continuing occupation of Palestine and the Syrian Golan Heights. The services provided by the banks support and sustain these activities. Additionally, as this report shows, it is evident that the banks are well aware of the types and whereabouts of the activity that is being carried out with their financial assistance. Our research has identified six categories of involvement of Israeli banks in the occupation. There is solid evidence of the involvement of most of the major Israeli commercial banks in these categories [Although not all of them are involved in all six categories]:
Providing mortgage loans 1. for homebuyers in settlements
Israeli banks provide mortgages to individuals who wish to buy or build housing units in West Bank settlements. The purchased property is used as collateral for the return of the loan, as is standard with mortgage loans. Thus, the bank that provided the loan is a stakeholder in a real estate property in a settlement and, in cases of foreclosure, the bank may end up fully owning that property.
2. Providing special loans for building projects in settlements
Israeli banks provide loans for various construction firms for the explicit purpose of constructing housing projects in Israeli West Bank settlements. These are loans provided under terms which are regulated through “accompaniment agreements” (Heskemay Livuy), certain aspects of which are regulated under the Sale (Apartments) (Assurance of Investments of Purchasers of Apartments) Law – 1974. The relevant articles in the Sale Law ensure homebuyers that a bank vouches for the construction project, backs the construction company and protects the buyers’ investments by providing the purchasers with a bank guarantee. In some cases, the accompanying bank also holds the real estate property as collateral until all of the housing units in the project are sold to buyers. Homebuyers’ payments for the property are then all deposited in a dedicated bank account in the accompanying bank, and the bank monitors the financial status as well as the development of the project.
3. Providing financial services to Israeli local authorities in the West Bank and the Golan Heights
Regional councils, local councils and municipalities of Israeli settlements in the occupied West Bank and the Golan Heights depend on the financial services provided by Israeli banks. Most importantly, Israeli banks provide loans to the local authorities of settlements, loans which are used for the development of infrastructure, the construction of public buildings and for providing municipal services to the residents of these settlements. Additional services to these local authorities include managing bank accounts, the provision of fund management services and the transfer of funds from the government and other sources, such as grants from the Israel National Lottery (Mifal HaPayis), to local authorities for the construction of schools, community centers and the like.
4. Operating branches in Israeli settlements Most Israeli banks have several branches in Israeli settlements. Through these branches the banks provide financial services to settlers and to commercial companies in settlements. The bank branches are part of the service infrastructure that enables the continued development of the settlements.
5. Providing financial help to businesses in settlements
Israeli banks provide financial services to businesses in the settlements and to businesses whose entire commercial activity is related to the occupation. For instance, Israeli banks provide loans and offer bank accounts to factories which are in the industrial zones of settlements or whose main area of activity is the construction of settlements or infrastructure projects for the use of Israelis in the occupied area. The property of these businesses in the occupied area is, many times, used as collateral for such loans.
6. Benefiting from access to the Palestinian monetary market as a captured market
Restricted by the agreements which were signed between the Palestinians and the Israelis as part of the Oslo process, the Palestinian monetary market cannot operate a currency of its own. Palestinian banks are therefore dependent on other banks for the provision of financial services. While there are four currencies that can be used in the Palestinian market (Israeli shekel, EU euro, Jordanian dinar and US dollar), the Israeli shekel dominates most of this market because of the subordination of the Palestinian market to that of Israel. As is most often the case with non-Israeli banks that deal with the Israeli shekel, Palestinian banks have to rely on Israeli banks, which serve as correspondence banks, for the transfer of funds and shekel-clearing services. However, according to official Palestinian sources, to provide these services, the Israeli banks which supply them demand high cash collaterals, of more than a billion shekels in total, which are deposited, by the Palestinian banks, in the Israeli banks. Additionally, the Israeli banks charge high commissions for these services and impose limitations on the transfer of money, both of which increase the costs of such operations and the risks involved for the Palestinian banks. It should be noted that the Israeli banks are only willing to work with some of the Palestinian banks; the banks refuse to include the newer banks in these agreements. Due to this restriction, the ability of the newer Palestinian banks to operate is severely impaired, since they cannot directly transfer shekels to the Israeli banks and, thus, become dependent on other Palestinian banks. Consequently, this restriction hinders the ability of the Palestinian monetary market to grow and develop. Additionally, as of the end of 2008, Israeli banks have severed their contractual connections with the Palestinian banks in Gaza and stopped providing any and all services to them. This has had a significant impact on the financial market in Gaza, bringing it to the brink of total collapse. The six categories of activity specified herein clearly portray the scope and extent to which banks in Israel are implicated in the financing of occupationrelated endeavors. It is evident that Israeli banks provide the financial basis for the construction of settlements, for the sustainability and maintenance of the settlements and for Israeli commercial activity in the occupied territory. Our report clearly illustrates that Israeli banks do not only provide these services and enable these activities, but are also fully aware of the type of activities for which they provide financial support. In addition, Israeli banks reap financial benefits for Israeli financial institutions from the subordination of the Palestinian financial market as a captured market. In a more general perspective, it can be stated that any and all aspects of Israeli control over the occupied territory have a financial foundation and that none of these financial activities of individuals, organizations, governmental institutions and commercial companies could take place without the active support of banks. The findings of this research show that as the providers of these services, Israeli banks are principle beneficiaries of financial activity in the illegal Israeli settlements in the occupied territories and in Israeli control over the Palestinian financial market.