A Palestinian banking crisis has been averted for the time being, after Israel’s Discount Bank — facing international pressure — agreed to push off its plan to stop providing correspondent banking services to Palestinian financial institutions, an Israeli and a Palestinian official told The Times of Israel on Monday.

Discount had informed Palestinian banks earlier this summer that on September 1 it would cease the service, which is essential to the import and export of goods to and from the West Bank.

Following intensive negotiations with the Bank of Israel — and amid significant pressure from the US and the European Union — Discount agreed to put off that decision until December 31, the officials said.

Discount and Hapoalim are the only Israeli banks that provide correspondent banking services, tethering the West Bank to the global economy.

Hapoalim had initially informed Palestinian banks of a decision to cease providing the service on October 1.

Hapoalim is also expected to push off that move until the end of 2026, though a final decision has not yet been made, the Israeli and Palestinian officials said.

The banks confirmed progress in their talks with the Bank of Israel on August 21, but Discount didn’t agree to put off its deadline until a day before it was set to kick in.

The two banks had blamed the Israeli government for their decision to cease correspondent banking services, explaining that they had been assured roughly a decade ago that a new financial entity would be established to assume the task.

But successive governments dragged their feet on the matter, with finance ministers instead signing indemnity waivers meant to shield Discount and Hapoalim from possible legal liability.

Finance Minister Bezalel Smotrich began reassessing that policy as part of a host of steps aimed at weakening the Palestinian Authority. Over the past year, he signed waivers that only lasted for two weeks at a time, extracting significant measures to expand Israeli settlements in the West Bank in exchange for each........

© The Times of Israel