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