Israeli banks refusing shekel cash deposits from West Bank, Palestinian officials say

Israeli banks are refusing shekel cash transfers from Palestinian banks in the West Bank in a move that could soon prevent Palestinians from accessing vital goods and services, Palestinian officials said.

The office of Israel's finance minister, Bezalel Smotrich, who in June extended a waiver that allows the country's banks to cooperate with Palestinian banks in the West Bank, had no immediate comment.

"In the next few days, banks in Palestine will be unable to finance trade operations between Palestinian and Israeli merchants, as their ability to make financial transfers is directly connected to shipping the accumulated shekel banknotes to their Israeli counterparts," the Palestinian Monetary Authority said.

It added this would prevent Palestinians from accessing vital goods and services as they will be unable to pay for them through official banking channels.

In late June, Smotrich extended a waiver that allowed cooperation between Israel's banking system and Palestinian banks in the West Bank. The waiver was set to expire at the end of June, and this decision allows Israeli banks to process shekel payments for services and salaries tied to the Palestinian Authority (PA). Without it, the Palestinian economy would take a hit. 

Smotrich extended the waiver during a cabinet meeting in June, his spokesperson said. 

International bodies and leaders have called on Israel to maintain banking links between Israeli and Palestinian banks in the past. In May, G7 finance leaders called on Israel to maintain banking links to allow vital transactions, trade, and services. 

In the G7 statement, the Group of Seven finance ministers and central bank governors called on Israel "to release withheld clearance revenues to the Palestinian Authority, in view of its urgent fiscal needs."

The G7 also called for the removal or relaxation of other fiscal measures to "avoid further exacerbating the economic situation in the West Bank."

The Palestinian economy is reliant on this banking relationship to process transactions made in Israeli shekels. Some 53 billion shekels ($14 billion) were exchanged at Palestinian banks in 2023.