Israeli Banks Set to Sever Ties with Palestinian Lenders

Israel Discount Bank is scheduled to end its association on September 1, followed by Bank Hapoalim on October 1. These institutions currently process approximately 51 billion shekels, or $16.6 billion, in annual transactions for the Palestinian Authority. With 90% of Palestinian trade—including essential food, fuel, and medical supplies—routed through Israel, a complete withdrawal could paralyze local commerce and leave billions of shekels in cash frozen within the West Bank.

Palestinian Monetary Authority Governor Yahya Shunnar warned that the shift would force the economy into unregulated, cash-based channels, which carry higher risks for financial crime. Shunnar maintains that Palestinian anti-money laundering frameworks already meet or exceed international standards, a position supported by recent assessments from the United States and the United Kingdom. However, the banks remain wary of the unstable waiver system overseen by Israeli Finance Minister Bezalel Smotrich. Without a permanent legal solution, lenders argue they cannot balance their regulatory responsibilities to shareholders against the persistent threats of legal liability.