Israeli banks set to sever financial links with Palestinian banks, sparking payment fears Submitted by Fayha Shalash on Fri, 07/24/2026 - 09:54 Two Israeli banks cutting ties with Palestinian financial system could disrupt trade, salary payments, imports and financial transfers across occupied territories An Israeli man stands beside an automated teller machine at a Bank Hapoalim branch in Jerusalem, 1 May 2020 (Menahem Kahana/AFP) Off Israeli banks Hapoalim and Discount have informed Palestinian banks of their intention to halt vital correspondent banking services within weeks, news agency AFP reported. Five Palestinian banks that rely on Bank Hapoalim for correspondent banking services will lose access to these services on 13 August, while banks that conduct transactions through Discount Bank face a similar fate on 1 September, the report quoted Palestinian banking officials as saying. The Israeli finance ministry said that the decision was made due to "increasing public risks and concerns about private lawsuits that could target Israeli banking institutions".
In a statement, the ministry said it is in discussion with the two banks to ensure the continuation of correspondent banking services "in a safe and responsible manner," while protecting Israel's security and economic interests. Palestinian banks are linked to Bank Hapoalim and Bank Discount through correspondent banking relationships, an operational link connecting the Palestinian banking system to the Israeli financial system. (adsbygoogle = window.adsbygoogle || []).push({}); The linkage ensures smooth functioning of essential operations such as executing payments in shekels between Palestinian and Israeli banks, settling payments for Palestinian imports from Israel (which constitute the bulk of Palestinian trade), receiving and transferring wages of Palestinian workers employed in Israel and the settlements.
The arrangement also allows for returning surplus shekel banknotes accumulated in Palestinian banks to the Israeli banking system, and facilitating transfers between Palestinian and Israeli companies. If the ties are severed without any alternative being found, it could have far-reaching consequences, including disruptions in payments between Palestinian and Israeli companies. The move will also disrupt essential imports such as food, fuel, and medicine, and worsen the existing shekel cash a…
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