Bank Hapoalim (TASE: POLI) and Israel Discount Bank (TASE: DSCT), the two Israel banks connected to the Palestinian banking system, are likely to postpone their decision to cut the ties, sources inform "Globes." The move follows a request from the Bank of Israel, which asked the two banks to continue providing financial services to prevent an economic upheaval. As far as is known, a final decision has not yet been made, but discussions are underway to make this possible.
Bank Hapoalim and Israel Discount Bank have served as correspondent banks for the financial system in the Palestinian Authority for decades. This activity is a vital pipeline for mutual trade worth tens of billions of shekels annually and allows ongoing payment for goods and services. The volume of trade with the Palestinian Authority is estimated at more than NIS 20 billion a year, in both exports and imports. A complete severance of relations could paralyze trade, lead to a monetary collapse in the West Bank, and harm many Israeli companies.
In recent years, pressure has increased from both banks to terminate the agreement, due to exposure to serious legal and international risks related to the international prohibition of money laundering and terrorist financing. The continuation of activity was only possible subject to letters of indemnity and exemption from claims from the state. In recent months, concerns among the banks have risen, and at times the letters of indemnity were issued with great frequency and in the past for short periods of a few months, which created ongoing uncertainty in the system.
As a long-term solution, the Israeli government previously approved the establishment of a designated government company that would take over the management of the activity and release the commercial banks from liability. But due to legislative and bureaucratic delays, the company has not yet begun operating. The current response to the Bank of Israel's request was intended to buy additional time to formulate a response, due to heavy international pressure, mainly from the US administration, to prevent the collapse of the Palestinian Administration.
"The New York Times" reported this week that the Palestinian Monetary Authority Governor Yahya Shunnar, warned of the consequences of the Israeli banks' disengagement and added that he had received a message from the Bank of Israel: Prepare a plan to create an alternative to the shekel. This is a move that is expected to be complex and have repercussions and upset trade relations.
Published by Globes, Israel business news - en.globes.co.il - on August 20, 2026.
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