Full story
Banks avert September cutoff
Israel Discount Bank agreed to delay its plan to stop providing correspondent banking services to Palestinian financial institutions until December 31, avoiding an immediate crisis in the Palestinian Authority banking system.
“acordó aplazar hasta el 31 de diciembre su plan de dejar de prestar servicios de banca corresponsal”
The bank had told Palestinian banks it would suspend the service starting September 1, but negotiations with the Bank of Israel and pressures from the United States and the European Union led Discount to accept postponing the measure to the end of the year.
The dispute is tied to the post-Oslo financial structure in which the shekel became the main currency in Judea and Samaria and Gaza, while Palestinian banks lacked capacity to settle certain operations in that currency.
Discount and Hapoalim are described as the only Israeli banks providing this correspondent service, which the sources say is indispensable for processing payments in shekels and operations linked to import and export goods.
Haaretz reports that Israel Discount Bank was set to halt working with Palestinian banks on September 1 and Bank Hapoalim in a month, but after negotiations with the Finance Ministry the banks agreed to delay severing ties until the end of 2026, with Bank of Israel Deputy Governor Andrew Abir saying, "The deadline has been pushed off."
Indemnity waivers and risk
Haaretz says the correspondent-banking relationship had been maintained through indemnity waivers signed by Israel's finance minister, with the current minister Bezalel Smotrich overseeing the waiver mechanism that enables cooperation between Israeli and Palestinian banks.
Abir told Reuters that the long-term question would fall to Israel's next government, saying, "Then, it will be an issue for the new government to decide who should be carrying on that burden" of correspondent banking.
The waiver is described as allowing Israeli banks to process shekel payments for services and salaries tied to the Palestinian Authority without the risk of being charged with money laundering and funding terrorism.
The Palestinian Monetary Authority estimates that Discount and Hapoalim process 51 billion shekels ($17 billion) a year in transactions for the PA, and the source adds that 90 percent of Palestinian trade such as food, fuel and medicines passes through Israel.
In a separate account, the Ages Network says the value of transactions processed by correspondent Israeli banks reached about 51 billion shekels during 2025, warning that any cut or restriction would disrupt trade and payments and limit Palestinian banks’ ability to execute imports- and exports-related transfers.
Arab League warns of disruption
The Palestinian Monetary Authority governor Yihya Shunnar and Arab League Secretary-General Nabil al-Fahmi were briefed in Cairo on the economic and financial developments in the State of Palestine and the humanitarian and economic repercussions of cutting correspondent banking relations.
“to preserve the unity of the Palestinian banking system and maintain financial and banking channels”
In the meeting at the Arab League Secretariat headquarters in Cairo, Shunnar stressed the importance of forging a unified Arab stance to preserve the unity of the Palestinian banking system and maintain financial and banking channels, most notably correspondent banking relations.
Shunnar reviewed punitive policies and measures imposed by Israel to undermine the Palestinian economy and banking sector, including measures that led to Israeli currency concentration in Palestinian banks and Israeli threats to correspondent banking relations.
The Ages Network says Shunnar warned that consequences of disruptions would not be limited to financial and economic institutions, but would directly affect everyday life of citizens, including their ability to obtain food, medicine, fuel and energy, as well as hospitals and essential services.
The same source quotes Shunnar calling for coordinated Arab action to release settlement funds and protect the Palestinian economy by preserving and sustaining financial and banking channels, warning that disruption could reflect on families’ living needs and the capacity of vital sectors to provide their services.