‘It’s a rock’
If correspondent payments ended, Shunnar warned, the entire financial system would grind to a halt, taking with it trade and prices for consumer goods.
“That’s not a slope, it’s a cliff,” Shunnar said.
Israel’s finance ministry confirmed that the two banks had proposed cutting ties with their Palestinian counterparts.
“In light of the general risk environment and growing concern about private lawsuits against banking entities, Israeli banks recently announced their intention to cease providing correspondent banking services,” the ministry said on Wednesday.
The ministry is in discussions with the banks in an effort to “enable the continuation of the corresponding banking activities in a safe and responsible manner, while protecting the security and economic interests of the State of Israel,” she said.
Both banks currently serve as a bridge between the Palestinian and Israeli financial systems, processing transactions in Israeli shekels — the currency also used in the Palestinian territories.
To protect Israeli banks from legal liability for transactions processed on behalf of Palestinian banks, the Israeli government renews an indemnity every six months.
An Israeli banking official told AFP that commercial banks no longer want to bear these risks — including potential exposure to money laundering or terrorist financing — arguing that the deal was always intended to be temporary.
“The risks have increased over the years and giving up is not enough. They (banks) want the state to take responsibility,” the official said.
