Ramallah, WEST BANK (Reuters)
Israeli banks' unwillingness to take shekel cash deposits from the West Bank is hurting the Palestinian economy as the costs of lost interest and stockpiling shekel notes grow, a top Palestinian regulator said.
Diplomatic sources familiar with the situation confirmed the existence of the problem, which one said seemed largely driven by reluctance among Israeli banks to be seen as cooperating with Palestinians by their domestic customers.
Ordinarily, the 20 banks operating in the West Bank moved shekel deposits through two correspondent banks, Bank Hapoalim and Israel Discount Bank, into Israel where they could earn interest and replenish their accounts.
Jihad al-Wazir, governor of the Palestine Monetary Authority (PMA), said the correspondent banks stopped accepting shekel notes at the beginning of 2009, meaning West Bank institutions have been building up huge stockpiles of shekels, unable to move them into Israel-based accounts.
"The banks have reached their limit and physically there is no space," he told Reuters in an interview.
"If we cannot handle the cash, this is not a normal state of business. Cash has reached unprecedented levels," said Wazir, adding that cash stored in the West Bank has reached 1.2 billion shekels, whereas the banks need only 300 million. |
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"Policy not changed" " There is no real reason for Israeli banks to refuse to accept cash deposits " Jihad al-Wazir, PMA A Bank Hapaolim spokeswoman said its "policy towards the Palestinian banks has not changed." Israel Discount Bank said it had stopped all activity in Gaza last January but it did comment on the West Bank.
The Bank of Israel, which Wazir said had promised to help, did not respond to phone calls and emailed questions from Reuters.
"There is no real reason for Israeli banks to refuse to accept cash deposits," Wazir said, adding that any fears in Israel about money laundering were "unsubstantiated especially considering that the PMA applies strong measures in anti-money laundering."
"This is a cash technical problem and not a political problem. I think it should be resolved as soon as possible," Wazir said.
At the office of Middle East peace envoy Tony Blair, the former British prime minister who represents a quartet of major power mediators, a source said Blair's team had raised the issue with the Israeli authorities to help resolve the problem.
Noting that Israeli banks still clear shekel cheque and wire transactions for Palestinian banks, the source questioned whether Israel had serious concerns about money laundering.
The root of the problem with cash clearing appeared to lie with the "public relations" concerns of Israeli banks unwilling to be associated by Israeli customers with the Palestinians, the source said. |
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Heaps of shekels " There are increased operational risks, increased insurance premiums and loss of revenue because this money is sitting idle and not being reinvested " Wazir In July, Palestinian banks were able to deposit 300 million shekels ($81 million) at Israel's central bank after the United States and International Monetary Fund intervened, Wazir said.
Wazir said the PMA has asked the U.S. embassy, the EU and Blair to intervene on this occasion.
Banks in the West Bank are incurring bigger insurance premiums, security fees and other expenses from having to secure the heaps of shekels.
"There are increased operational risks, increased insurance premiums and loss of revenue because this money is sitting idle and not being reinvested."
Israeli banks severed ties with Gaza branches whose regional management are located in the West Bank after Israel declared Hamas-controlled Gaza an "enemy entity" in December 2007.
The banks in the West Bank -- local, Arab and foreign -- continued to do business with Israeli banks.
The Western-backed leader Mahmoud Abbas controls the Israeli-occupied West Bank after losing Gaza to Hamas Islamists in a brief civil war in June 2007. Palestinians want the two territories to form an independent state, but statehood talks have been stuck since Israel's war against Hamas militants in Gaza that ended last January.
There is no Palestinian currency. The dollar and the dinar, currency of Jordan which controlled the West Bank from 1948 to 1967, are both used for some transactions, though the shekel is most commonly handled in day-to-day cash transactions. |
