Israel’s Banks Keep a Financial Bridge Open, As Services for Palestinian Banks Continue Through the End Of 2026

Money rarely announces its journey. It moves through electronic instructions, correspondent accounts and banking systems that most people never see. Yet those quiet channels can become essential to everyday commerce. Between Israeli and Palestinian banks, one such channel has now been given several more months to continue operating.

Israel’s Bank Hapoalim and Israel Discount Bank had been preparing to end their correspondent relationships with Palestinian banks. After discussions with Israel’s Finance Ministry, however, the banks agreed to continue providing the services through the end of 2026.

The arrangement is significant because Palestinian banks depend on Israeli banking institutions for a range of transactions conducted in shekels. The Israeli shekel is widely used in Palestinian commerce, making access to the Israeli financial system an important part of the movement of money between businesses and institutions.

According to Reuters, around 51 billion shekels, equivalent to approximately $17 billion, in transactions are processed annually between Israeli and Palestinian banks. About 90 percent of Palestinian trade relies on access to the Israeli financial system.

The planned separation had raised concerns about what would happen to these financial flows. Correspondent banking relationships allow banks in different financial systems to process payments, settle transactions and provide access to currencies that may otherwise be difficult to transfer directly.

The two Israeli banks had cited concerns involving potential exposure to money laundering and terrorism-financing risks. Those concerns are part of the wider compliance obligations faced by banks when maintaining relationships with institutions operating in complicated financial and regulatory environments.

The temporary extension does not establish a permanent framework. Andrew Abir, deputy governor of the Bank of Israel, said the next Israeli government would need to determine who should ultimately take responsibility for continuing correspondent banking services with Palestinian banks.

For companies and institutions that rely on these channels, the extension provides additional time. Payments can continue to move through established systems while financial authorities and banks consider how a longer-term arrangement might be structured.

The issue also demonstrates how closely neighboring economies can remain connected through financial infrastructure. Even when economic conditions are difficult, businesses still need to pay suppliers, receive revenues and settle obligations. Banking networks become the invisible framework that allows those ordinary transactions to continue.

For now, the agreement carries the relationship through December 2026. What follows will depend on the framework ultimately chosen by Israeli authorities and financial institutions, but the immediate result is clear: an important channel for cross-border financial activity will remain open for several more months.

AI Image Disclaimer All illustrations in this article are AI-generated contextual images. They are intended to represent banking and financial infrastructure and are not photographs of actual Israeli or Palestinian banking transactions.

Sources Reuters Bank of Israel The Times of Israel Wafa