Israel acts to ease Palestinian banking crisis it helped create, but is it moving too late?

Key Points:

• The Palestine Monetary Authority (PMA) will hold a press conference warning about the potential collapse of the Palestinian economy due to two major Israeli banks, Discount and Hapoalim, ceasing correspondent banking services with Palestinian banks later this year.
• Israeli Finance Minister Bezalel Smotrich has restricted indemnity waivers that allow these banks to handle Palestinian transactions, linking the waivers to increased settlement expansion funding and causing delays that frustrated the banks.
• Correspondent banking services are critical for Palestinian banks to process cross-border payments in shekels, and their cessation could disrupt trade and economic stability in the West Bank, risking a shift to unregulated financial channels.
• The Israeli Finance Ministry is engaged in talks to find solutions to continue these banking services safely, but legislative hurdles and upcoming elections make a permanent fix unlikely soon.
• The US supports stable correspondent banking ties and urges the Palestinian Authority to implement reforms against money laundering and terror financing, while warning that destabilizing the banking sector undermines anti-money laundering efforts.