US, European officials urge Israel to not sever West Bank from global financial system
A Bank Hapoalim branch
Middle East Eye reports on 28 October 2024:
Western officials sent a letter to the Israeli government, warning that Prime Minister Benjamin Netanyahu is risking an “economic catastrophe” in the occupied West Bank if it doesn’t renew a waiver for international banks to maintain ties with Palestinian financial institutions.
The letter spearheaded by US Treasury Secretary Janet Yellen, expresses concerns that Israeli Finance Minister Bezalel Smotrich will not renew the waiver that is set to expire on Thursday, The Financial Times reported.
“The actions taken by some members of your government to deny the West Bank access to financial resources endangers Israel’s security and threatens to further destabilise the entire region,” a copy of the letter says.
The letter was also signed by seven of Yellen’s counterparts, including officials from the European Union and the United Kingdom, according to the Financial Times.
The Palestinian economy is based on the Israeli currency, the shekel, making it reliant on ties to Israel, and its financial dealings with the rest of the world must go through the Bank of Israel and other Israeli banks.
Two Israeli banks, Israel Discount Bank and Bank Hapoalim, currently maintain the connections of Palestinian banks with the banking system in Israel and globally.
To protect them from lawsuits involving the Palestinian Authority and “transfering funds to terror groups”, the Israeli government has been issuing a waiver of protection for the two banks on an annual basis, signed by the finance minister.
Smotrich, who became finance minister in 2022, is refusing to renew the arrangement. Without this protection, the PA would be stripped of immunity and Israeli banks would be exposed to lawsuits and likely cut ties to Palestinian banks.
The results of isolating the PA from the financial world would significantly paralyse the Palestinian economy.