US Urges Israel to Extend Banking Exemption for Cooperation with Palestinian Banks

The US government has called on Israel to extend a financial exemption that allows Israeli banks to cooperate with Palestinian banks, warning that Israel’s decision to grant only a one-month extension could create a “looming crisis” by November 30.

The exemption enables financial transactions in Israeli shekels to support services and salaries within the Palestinian Authority without Israeli banks facing accusations of money laundering or terror financing.

This development follows Israeli Finance Minister Bezalel Smotrich's announcement that he would approve a one-month extension for the cooperation, a decision endorsed by the Israeli cabinet.

In a joint statement, US Secretary of State Antony Blinken and Treasury Secretary Janet Yellen expressed that the limited timeframe of this extension leaves a looming crisis by November 30, amplifying uncertainty for international banks, Israeli businesses operating in the West Bank, and, most importantly, ordinary Palestinians.

They urged Israel to consider a minimum one-year extension to stabilize the Palestinian economy and avoid further economic fallout in the occupied West Bank, emphasizing that Israel’s security could be impacted if financial stability in the region deteriorates.

Without this exemption, Palestinian banks would lose access to the Israeli financial network, affecting critical transactions that ensure economic functionality in the Palestinian territories.

According to a recent World Bank report, Palestinian territories are already facing severe economic challenges, with Gaza’s GDP declining by 86% year-on-year in the first quarter of 2024.