Identifier
Created
Classification
Origin
07JERUSALEM2210
2007-10-26 12:22:00
CONFIDENTIAL
Consulate Jerusalem
Cable title:
BANKS AWAIT NOVEMBER 30 CUTOFF OF ISRAELI
how-toVZCZCXRO0301 OO RUEHROV DE RUEHJM #2210 2991222 ZNY CCCCC ZZH O 261222Z OCT 07 FM AMCONSUL JERUSALEM TO RUEHC/SECSTATE WASHDC IMMEDIATE 9400 INFO RUEHXK/ARAB ISRAELI COLLECTIVE PRIORITY RHEHNSC/NSC WASHDC PRIORITY RUEATRS/DEPT OF TREASURY WASHDC PRIORITY RUEHBS/USEU BRUSSELS PRIORITY
C O N F I D E N T I A L JERUSALEM 002210
SIPDIS
SIPDIS
NEA FOR FRONT OFFICE; NEA/IPA FOR
GOLDBERGER/SHAMPAINE/BELGRADE; NSC FOR ABRAMS/WATERS;
TREASURY FOR SZUBIN/GRANT/HARRIS/NUGENT/HIRSON
E.O. 12958: DECL: 10/25/17
TAGS: ECON EFIN KFTN KWBG IS
SUBJECT: BANKS AWAIT NOVEMBER 30 CUTOFF OF ISRAELI
CORRESPONDENT BANK SERVICES
REF: A. JERUSALEM 2200
B. TEL AVIV 2984
Classified By: Consul General Jake Walles, Reasons 1.4 (b) and (d).
C O N F I D E N T I A L JERUSALEM 002210
SIPDIS
SIPDIS
NEA FOR FRONT OFFICE; NEA/IPA FOR
GOLDBERGER/SHAMPAINE/BELGRADE; NSC FOR ABRAMS/WATERS;
TREASURY FOR SZUBIN/GRANT/HARRIS/NUGENT/HIRSON
E.O. 12958: DECL: 10/25/17
TAGS: ECON EFIN KFTN KWBG IS
SUBJECT: BANKS AWAIT NOVEMBER 30 CUTOFF OF ISRAELI
CORRESPONDENT BANK SERVICES
REF: A. JERUSALEM 2200
B. TEL AVIV 2984
Classified By: Consul General Jake Walles, Reasons 1.4 (b) and (d).
1. (SBU) Summary: The Bank of Palestine (BoP) and Arab Bank
have been told by their Israeli correspondent banks that they
will terminate all correspondent banking services effective
November 30. BoP and Arab Bank have no clear indication if
the Israeli state-owned Postal Bank is willing to provide
correspondent banking services after that. Senior officials
from BoP and Arab Bank believe that termination of
correspondent services will significantly disrupt their
operations and could force their banks to consider
transitioning to another currency. End summary.
-------------- ---
Bank Hapoalim and IDB to Cut Ties by November 30
-------------- ---
2. (C) Bank of Palestine (BoP) General Manager Hashim Shawa
told Econoff that Bank Hapoalim's board of directors has
decided to terminate all banking services to BoP effective
November 30. Bank Hapoalim threatened to sever ties with BoP
on October 23, but a personal appeal by Shawa resulted in an
extension of the termination deadline. In the interim, Bank
Hapoalim continues to provide BoP normal correspondent bank
services, even facilitating a recent BoP cash shipment into
Gaza (reftel),according to Shawa.
3. (C) In an October 15 letter to BoP and Arab Bank, Israel
Discount Bank (IDB) described a 45-day plan to terminate
services to both banks, starting with an immediate halt of
cash services to Gaza branches. Shawa and Arab Bank Regional
Manager Mazen Abu Hamdan told Econoff separately that IDB
planned to cutoff cash services to their West Bank branches
by November 15, followed by the termination of all services
November 30. Shawa asserted there is enough liquidity in the
West Bank for banks to ship cash to their Gaza branches,
provided cash shipments are permitted to enter Gaza. The
loss of check clearing services, however, will be disastrous
for the Palestinian banking sector, according to Shawa, and
an alternative currency to the NIS would have to be adopted.
(Note: BoP works primarily with Bank Hapoalim. IDB provides
almost all of Arab Bank's NIS check clearing needs. End
note.)
4. (C) Abu Hamdan noted that IDB had first warned Arab Bank
of a November 30 termination date in May 2007. Abu Hamdan
and Shawa had both been hopeful that procedural changes and
safeguards they and other banks had proposed since that time
would be sufficient to allow Bank Hapoalim and IDB to
maintain their correspondent relationships. Abu Hamdan and
Shawa stated separately that their optimism plummeted after
the GOI designated Gaza as a "hostile entity" in September,
and both Bank Hapoalim and IDB announced their intention to
move forward with the termination of services. Abu Hamdan
asserted that Arab Bank and First International Bank of
Israel had been in serious discussions on establishing ties
until the GOI designation, after which talks ground to a
halt.
--------------
Israeli Postal Bank
--------------
5. (C) Abu Hamdan and Shawa said they continue to encourage
efforts to have the Israeli state-owned Postal Bank assume
responsibility for providing corespondent banking services to
the West Bank and Gaza. Palestine Monetary Authority (PMA)
Governor Abed and Bank of Israel Fischer met on the margins
of the recent World Bank/IMF meetings to discuss the issue,
according to Shawa. Abu Hamdan complained that the process
has been extremely slow, noting that he provided Postal Bank
with a copy of Arab Bank's service agreement with IDB in
September, but has heard nothing since. Neither BoP nor Arab
Bank has any clear indication if the Postal Bank is willing
to step in on November 30. Shawa indicated that BoP has
approached CitiBank Group and a number of major European
banks in an attempt to secure NIS check clearing services, to
no avail.
WALLES
SIPDIS
SIPDIS
NEA FOR FRONT OFFICE; NEA/IPA FOR
GOLDBERGER/SHAMPAINE/BELGRADE; NSC FOR ABRAMS/WATERS;
TREASURY FOR SZUBIN/GRANT/HARRIS/NUGENT/HIRSON
E.O. 12958: DECL: 10/25/17
TAGS: ECON EFIN KFTN KWBG IS
SUBJECT: BANKS AWAIT NOVEMBER 30 CUTOFF OF ISRAELI
CORRESPONDENT BANK SERVICES
REF: A. JERUSALEM 2200
B. TEL AVIV 2984
Classified By: Consul General Jake Walles, Reasons 1.4 (b) and (d).
1. (SBU) Summary: The Bank of Palestine (BoP) and Arab Bank
have been told by their Israeli correspondent banks that they
will terminate all correspondent banking services effective
November 30. BoP and Arab Bank have no clear indication if
the Israeli state-owned Postal Bank is willing to provide
correspondent banking services after that. Senior officials
from BoP and Arab Bank believe that termination of
correspondent services will significantly disrupt their
operations and could force their banks to consider
transitioning to another currency. End summary.
-------------- ---
Bank Hapoalim and IDB to Cut Ties by November 30
-------------- ---
2. (C) Bank of Palestine (BoP) General Manager Hashim Shawa
told Econoff that Bank Hapoalim's board of directors has
decided to terminate all banking services to BoP effective
November 30. Bank Hapoalim threatened to sever ties with BoP
on October 23, but a personal appeal by Shawa resulted in an
extension of the termination deadline. In the interim, Bank
Hapoalim continues to provide BoP normal correspondent bank
services, even facilitating a recent BoP cash shipment into
Gaza (reftel),according to Shawa.
3. (C) In an October 15 letter to BoP and Arab Bank, Israel
Discount Bank (IDB) described a 45-day plan to terminate
services to both banks, starting with an immediate halt of
cash services to Gaza branches. Shawa and Arab Bank Regional
Manager Mazen Abu Hamdan told Econoff separately that IDB
planned to cutoff cash services to their West Bank branches
by November 15, followed by the termination of all services
November 30. Shawa asserted there is enough liquidity in the
West Bank for banks to ship cash to their Gaza branches,
provided cash shipments are permitted to enter Gaza. The
loss of check clearing services, however, will be disastrous
for the Palestinian banking sector, according to Shawa, and
an alternative currency to the NIS would have to be adopted.
(Note: BoP works primarily with Bank Hapoalim. IDB provides
almost all of Arab Bank's NIS check clearing needs. End
note.)
4. (C) Abu Hamdan noted that IDB had first warned Arab Bank
of a November 30 termination date in May 2007. Abu Hamdan
and Shawa had both been hopeful that procedural changes and
safeguards they and other banks had proposed since that time
would be sufficient to allow Bank Hapoalim and IDB to
maintain their correspondent relationships. Abu Hamdan and
Shawa stated separately that their optimism plummeted after
the GOI designated Gaza as a "hostile entity" in September,
and both Bank Hapoalim and IDB announced their intention to
move forward with the termination of services. Abu Hamdan
asserted that Arab Bank and First International Bank of
Israel had been in serious discussions on establishing ties
until the GOI designation, after which talks ground to a
halt.
--------------
Israeli Postal Bank
--------------
5. (C) Abu Hamdan and Shawa said they continue to encourage
efforts to have the Israeli state-owned Postal Bank assume
responsibility for providing corespondent banking services to
the West Bank and Gaza. Palestine Monetary Authority (PMA)
Governor Abed and Bank of Israel Fischer met on the margins
of the recent World Bank/IMF meetings to discuss the issue,
according to Shawa. Abu Hamdan complained that the process
has been extremely slow, noting that he provided Postal Bank
with a copy of Arab Bank's service agreement with IDB in
September, but has heard nothing since. Neither BoP nor Arab
Bank has any clear indication if the Postal Bank is willing
to step in on November 30. Shawa indicated that BoP has
approached CitiBank Group and a number of major European
banks in an attempt to secure NIS check clearing services, to
no avail.
WALLES