Israeli banks sever Palestinian correspondent ties
Analysis based on 29 articles · First reported Jul 20, 2026 · Last updated Jul 24, 2026
The severance of correspondent banking ties threatens to disrupt trade flows, fuel shortages, and a broader economic crisis in the West Bank, potentially destabilizing regional markets. Israeli banks face legal and reputational risks, while Palestinian banks and the Palestine — Palestinian Authority face liquidity and solvency challenges, with billions of shekels trapped in vaults.
Israeli banks Bank Hapoalim and Israel Discount Bank have announced plans to terminate correspondent banking relationships with Palestinian banks, citing risks of money laundering and terrorism financing. The severance is scheduled to take effect on August 13, September 1, and October 1, 2026, affecting five Palestinian banks that rely on these services for essential imports, wage transfers, and trade financing. The Palestine — Palestinian Authority (PMA) has warned that the disruption could lead to an economic and humanitarian crisis in the West Bank, as 90% of Palestinian exports go to Israel and 100% of imports originate from or pass through it. The move comes amid ongoing tensions, including Israel's withholding of clearance revenues and restrictions on cash repatriation, which have already strained the Palestinian economy. The PMA has convened international stakeholders, including the IMF, International Monetary Fund, and International — United Nations Special Coordinator for the Middle East Peace Process, to urge coordinated intervention to preserve financial links and prevent a collapse of the Palestinian banking sector.
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