The Palestine Monetary Authority will be holding a press conference in Ramallah on Thursday titled, “The breaking point: sounding the alarm before collapse.”

Joined by senior officials from the United Nations, the World Bank and the International Monetary Fund, the PMA leadership will warn about a recent decision by two top Israeli financial institutions to cease correspondence with Palestinian banks later this year, in a move that could end the continued import and export of goods to and from the West Bank, a Palestinian official told The Times of Israel.

The decisions by Israeli banks Discount and Hapoalim could collapse the Palestinian economy, though they are motivated by frustration with the Israeli government for putting the financial institutions in this position to begin with.

Discount and Hapoalim have been caught in the middle of Finance Minister Bezalel Smotrich’s efforts to push the Palestinian Authority toward the brink, as he seeks to expand Israel’s control over the West Bank and “encourage the emigration” of the territory’s Palestinians.

One of the many steps Smotrich has taken to weaken the PA has been  to hold off on signing indemnity waivers allowing Israeli banks to handle transactions from Palestinian banks, which are used to tether the West Bank to the global economy.

Since the Oslo Accord peace agreements between Israel and the Palestinians in the 1990s, the Israeli government has tasked Discount and Hapoalim with providing correspondent banking services to Palestinian banks, which do not have access to the Israeli payment system and accordingly cannot clear transactions in shekels — the dominant currency in the West Bank.

The correspondent banking services provided by Discount and Hapoalim have allowed Palestinian banks to process cross-border payments for commercial activity.

But the two Israeli banks have long expressed concern that providing such services could expose them to lawsuits over alleged Palestinian money laundering and terror finance.

To mitigate the risk, the Israeli government for years has been signing indemnity waivers, while also assuring the banks that a new entity would be set up to take over for them in providing correspondent banking services.

That body — the Company for Correspondence Services — was established in 2019 by a previous government led by Prime Minister Benjamin Netanyahu. However, Knesset legislation is needed for it to start operating. While a bill has been crafted, successive governments have dragged their feet in advancing it due to the perception that it would benefit the Palestinians and it became an afterthought amid other domestic debates and regional tensions.

Since Smotrich’s appointment as finance minister at the end of 2022, the frustration at Discount and Hapoalim has reached new levels,........

© The Times of Israel