Bank Hapoalim has informed the Finance Ministry that it will have to stop doing business with its Palestinian counterparts unless Israel provides it with protection from legal action in the event that funds transferred to Palestinian banks were used for terrorist activities.
Bank officials recently came to the conclusion that Hapoalim would be exposed to lawsuits, in particular by foreign authorities involved in U.S. criminal lawsuits. They decided that the prudent thing would be to suspend ties with the Palestinians unless the Israeli government grants them indemnity against such claims.
Many foreign banks prefer to use the Israelis as an intermediary to dealing directly with the Palestinian banks. Bank Discount may be similarly exposed.
So far, the Finance Ministry has not been responsive to Hapoalim’s concern, insisting that such risk does not, in fact, exist. In addition, security forces object that unilateral action by the Israeli banks would severely harm the Palestinian economy, precarious in any case.