Identifier
Created
Classification
Origin
08TELAVIV2291
2008-10-07 13:24:00
CONFIDENTIAL
Embassy Tel Aviv
Cable title:  

ISRAELI-PALESTINIAN CORRESPONDENT BANKING

Tags:  ECON EFIN KWBG KTFN 
pdf how-to read a cable
VZCZCXYZ0001
PP RUEHWEB

DE RUEHTV #2291 2811324
ZNY CCCCC ZZH
P 071324Z OCT 08
FM AMEMBASSY TEL AVIV
TO RUEHC/SECSTATE WASHDC PRIORITY 8721
INFO RUEHAM/AMEMBASSY AMMAN PRIORITY 4845
RUEHEG/AMEMBASSY CAIRO PRIORITY 2858
RUEHJM/AMCONSUL JERUSALEM PRIORITY 0588
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
C O N F I D E N T I A L TEL AVIV 002291 

SIPDIS

TREASURY FOR DAS GLASER AND OIA

E.O. 12958: DECL: 10/05/2018
TAGS: ECON EFIN KWBG KTFN
SUBJECT: ISRAELI-PALESTINIAN CORRESPONDENT BANKING
RELATIONSHIP AT A CROSSROADS

REF: A. TEL AVIV 1508

B. TEL AVIV 1075

C. TEL AVIV 624

D. 07 TEL AVIV 3201

Classified By: Econ Counselor David R. Burnett for Reasons 1.4 (b)
and (d)


C O N F I D E N T I A L TEL AVIV 002291

SIPDIS

TREASURY FOR DAS GLASER AND OIA

E.O. 12958: DECL: 10/05/2018
TAGS: ECON EFIN KWBG KTFN
SUBJECT: ISRAELI-PALESTINIAN CORRESPONDENT BANKING
RELATIONSHIP AT A CROSSROADS

REF: A. TEL AVIV 1508

B. TEL AVIV 1075

C. TEL AVIV 624

D. 07 TEL AVIV 3201

Classified By: Econ Counselor David R. Burnett for Reasons 1.4 (b)
and (d)



1. (C) BEGIN SUMMARY AND COMMENT: On Sunday, September 29, Bank
Hapoalim (BH),one of only two Israeli commercial banks providing
correspondent services to Palestinian banks, informed the Bank of
Israel (BOI) that it would end its business relationship and cease
all services to Palestinian commercial banks on November 30. Esther
Deutch, Chief Legal Advisor at Discount Bank, told econoff that while
no formal decision has yet been made, Bank Hapoalim's move is likely
to inspire Discount to follow suit within the next few weeks. David
Zaken, Assistant Supervisor of Banks and Head of Examination and
Licensing, told econoff that while BOI officials have not met to
formally discuss their response, he believes that they will be able
to forestall Hapoalim's decision. Unless the BOI is able to pressure
the two banks to postpone or reconsider their decisions, it may be
forced to compel the Israeli Postal Bank to take over the
relationship. Were this initiative to somehow fail, Palestinian
commercial banks would be effectively cut off from access to shekel
money supplies and unable to transact business with Israel. This
would be inconsistent with the GOI's policy of maintaining the shekel
as the currency of the Palestinian Territories. END SUMMARY AND
COMMENT.


2. (C) On September 30th, Boaz Raday, Executive Vice President at
Bank Hapoalim, told Econoff that the bank had informed the BOI by
letter the previous day of its decision to end the bank's Palestinian
banking relationships. This move is the final step in the bank's
incremental withdrawal from such business (see reftel "A"). Raday
said that the decision was made at a meeting of Hapoalim's board of
directors the week before. He added that the board had come to the
end of its patience waiting for the GOI to force the semi-private
Postal Bank to take over the Palestinian correspondent banking
relationship.


3. (C) Raday claimed that the GOI's efforts with the Postal Bank had
been largely superficial over the past year. Real political will to
push the Postal Bank into accepting the portfolio was absent, he
said. If not altered by an ultimatum on the part of the Israeli
commercial banks, Raday believed the status quo would continue
indefinitely. He told econoff that the bank had continued to provide
services until now based only on an informal agreement with the
government. While the bank's board members wanted to be seen as
friendly towards GOI policy and the interests of the country, he
said, they also wanted to avoid scrutiny by BOI regulators as a
punitive measure for disobedience. Raday told econoff he had
personally informed contacts at the BOI of the bank's decision. He
described their reaction as calm but guarded and said he had no
indication of how they would respond once they had met internally on
the matter.


4. (C) In an informal conversation with Econoff on October 1, Esther
Deutch of Discount Bank, the only other bank currently providing
correspondent services to Palestinian counterparts, said that her
bank was aware of Hapoalim's recent decision. She said that her bank
was likely to do the same in the next few weeks, though formal
meetings on the issue had not yet been held. Deutch promised to keep
econoff abreast of Discount's decision in the matter.


5. (C) Econoff spoke with David Zaken of the BOI on October 6. Zaken
expressed great displeasure with Hapoalim's timing, saying the
central bank was currently immersed in measures to manage Israeli
exposure to the world financial crisis. Zaken said BOI officials had
not yet had the opportunity to meet and formulate a response to
Hapoalim's decision. He opined, however, that the BOI would be able
to persuade the bank to postpone its decision. Zaken was not able to
elaborate on what methods the bank might employ to do so. He
promised to contact econoff next week after the BOI holds internal
discussions on the matter.

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CUNNINGHAM