Palestinian Authority banks to expedite 4.5-billion-shekel transfer to Bank of Israel, sources tell JNS

The Bank of Israel declined to comment Thursday on a Palestinian Authority announcement that Israeli authorities had agreed to accelerate a transfer of approximately 4.5 billion shekels in surplus cash held in P.A. Banks.

Palestine Monetary Authority chief Yahya Shunnar said the decision moves up the fourth-quarter shipment of excess shekels to the Bank of Israel following "intensive interventions" By P.A. Leadership working with "international partners," According to the P.A.'s official Wafa news agency. He stated the move will "ease pressures resulting from the accumulation of excess shekels, improve banks' ability to manage liquidity, support the needs of citizens and the private sector for banking services and enhance financial market stability during the current period."

Israeli officials have not publicly confirmed the decision to expedite the transfer, which sources told JNS was approved in recent days.

The announcement comes as two Israeli banks are expected to end correspondent banking services to Palestinian banks in the coming weeks, a development that would disconnect Palestinian banks in Judea and Samaria from the shekel-clearing system and disrupt cross-border payments and international banking access.

Shunnar characterized the expedited transfer as an "urgent measure" Rather than a comprehensive solution, emphasizing the need to reduce reliance on the shekel and expand electronic payment methods.

Under existing agreements with Israel, Palestinian banks cannot directly access the Jewish state's payment system or clear shekel transactions independently. They depend on the Bank of Israel to accept surplus banknotes and credit their accounts, and on Israel Discount Bank and Bank Hapoalim for correspondent clearing services.

The Bank of Israel accepts up to 18 billion shekels annually in notes. An economist who has advised the P.A. Told the Associated Press that Palestinian banks receive an estimated 30 billion shekels yearly, with the remainder stored in vaults unavailable for loans, transfers or payments to Israeli suppliers.

The 4.5 billion approved for this transfer represents one quarter of the 18 billion annual ceiling and does not constitute an increase beyond it.

Israel Discount Bank and Bank Hapoalim provide these services under a Finance Ministry indemnity protecting them from liability under Israeli terror-financing law. Israel Discount Bank notified Palestinian counterparts in July it would end services beginning September 1, with Bank Hapoalim following October 1, citing elevated risk from the absence of a permanent solution. Bank Hapoalim said it had provided services "on a temporary basis" For years while awaiting an official arrangement the state had not delivered.

Successive governments have pointed to the Company for Correspondence Services, a state body established in 2019, as the permanent solution. The company has never begun operating because required Knesset legislation has not passed, and with parliament dissolved ahead of elections, passage appears unlikely in coming months.

The Israeli Prime Minister's Office declined to comment Thursday on progress toward a permanent solution allowing the Palestinian Authority continued financial system access.