PALESTINIAN BANKS CONCERNED ABOUT POSSIBLE HAMAS

C O N F I D E N T I A L JERUSALEM 002557

SIPDIS

SIPDIS

NEA FOR FRONT OFFICE; NEA/IPA FOR
GOLDBERGER/SHAMPAINE/BELGRADE; NSC FOR ABRAMS/PASCUAL;
TREASURY FOR SZUBIN/GRANT/HARRIS/NUGENT/HIRSON

E.O. 12958: DECL: 12/13/17
TAGS: ECON EFIN KFTN KWBG IS
SUBJECT: PALESTINIAN BANKS CONCERNED ABOUT POSSIBLE HAMAS
INTERFERENCE IN GAZA

REF: JERUSALEM 2522

Classified By: Consul General Jake Walles, Reasons 1.4 (b) and (d).


1. (C) Summary. Palestinian banking officials are concerned
that recent moves by Hamas have increased the likelihood of
interference in Gaza bank operations. Bank of Palestine
(BoP) leadership fears significant financial loses should it
fail to honor Hamas changes in the signatory authority over
Gaza municipality accounts as well as possible USG and PA
punitive measures should BoP be perceived as assisting Hamas.
Officials are concerned that Gaza banks may also have to
respond to orders from Hamas-controlled courts to freeze
accounts. End summary.


2. (C) Palestine Monetary Authority (PMA) Acting Governor
Jihad al-Wazir told Econoff December 4 that Hamas' "takeover"
of the Gaza municipality (reftel) and its consolidation of
control over Gaza courts may pave the way for interference
in banking operations in Gaza. Banks have already balked at
Hamas attempts to change the signature authority on Gaza
municipality bank accounts. Al-Wazir said banks believe that
their refusal to honor orders from Hamas-controlled courts to
freeze accounts will lead Hamas to interfere in the banking
system. Al-Wazir suggested that Hamas officials in favor of
a hands-off approach to the banks are losing influence to
more radical and aggressive elements.


3. (C) The PMA's branch office is the only PA institution
that continues to function freely in Gaza, according to
al-Wazir. He said that Hamas recently prevented the
Palestine Central Bureau of Statistics (PCBS) branch office
from conducting a census in Gaza. Local press reported that
Hamas demanded to oversee the census and control the release
of census data.


4. (C) Bank of Palestine (BoP) General Manager Hashim Shawa
told Econoff December 5 that the Hamas "takeover" of the Gaza
municipality has put BoP in "an awkward situation." He
explained that BoP holds municipality accounts as well as the
accounts of 2,000 municipality employees. BoP's total loan
exposure with the municipality and its staff is about USD 7.5
million. Shawa said that BoP received a letter December 2
giving signature authority for the municipality accounts to
the director general newly appointed by Hamas. Shawa said
that BoP wishes to continue its long-standing relationship
with the municipality and its employees -- and continue
receiving payments on outstanding loans -- but is wary of
running afoul of PA and USG restrictions on dealing with
Hamas. He said he has requested guidance from the PMA but
has not yet received a response.


5. (C) Shawa also expressed concern over a possible
confrontation with Hamas if BoP receives orders from
Hamas-controlled courts in Gaza to freeze accounts. Shawa
reiterated that BoP has completed precautionary measures,
including moving its headquarters to Ramallah, that allow the
bank to quickly "pull the plug" on its Gaza operations,
"leaving only buildings, desks, and equipment" if Hamas moves
against the bank.
WALLES