HAMAS-AFFILIATED "BANK" OPENS IN GAZA; PMA

C O N F I D E N T I A L JERUSALEM 000690 SIPDIS NEA FOR FRONT OFFICE AND NEA/IPA; NSC FOR SHAPIRO/KUMAR; TREASURY FOR MOGER DEPT PLEASE PASS TO USAID FOR ANE/MEA:MCCLOUD/BORODIN JOINT STAFF FOR LTGEN SELVA E.O. 12958: DECL: 04/23/2014 TAGS: EAID ECON EFIN IS KTFN KWBG PGOV SUBJECT: HAMAS-AFFILIATED "BANK" OPENS IN GAZA; PMA DECLARES IT ILLEGAL REF: 08 JERUSALEM 2274 Classified By: Consul General Jake Walles, Reasons 1.4 (b) and (d) ¶1. (SBU) Summary: The Islamic National Bank (INB) opened in Gaza City on April 22. Speaking at the opening ceremony, INB CEO Ala'a al-Din Al-Rafati said that INB will offer full banking services, including taking deposits and making loans. However, the Palestinian Monetary Authority PMA) announced that the "INB" is illegal and that Palestinians should not deal with it. PMA Governor Jihad al-Wazir told post recently that he considers that INB to be only a "glorified moneychanger" operation. End summary. INB opens its doors -------------- ¶2. (C) The Islamic National Bank of Gaza opened its doors to the Gaza public on April 22 in a well-attended opening ceremony, according to contacts in Gaza and press reports. INB Chairman Ala'a al-Din Al-Rafati, who spoke at the ceremony, said that the bank offers a full range of services to customers, including taking deposits and making loans, and that it will not face cash problems in any currency, including New Israeli Shekels (NIS). Al-Rafati said that the INB will have a very aggressive loan program, as the bank plans to lend 80 percent of total deposits (West Bank banks loan 28 percent of total deposits). Private sector contacts in Gaza reported that the INB is housed in an old Cairo Amman Bank branch in Gaza City and is equipped with vaults and operating computer systems. Al-Rafati said that the bank plans to open additional branches in the center and south Gaza Strip in the coming months. 6,000 customers and growing -------------- ¶3. (C) According to press reports, Al-Rafati said that the bank has already opened 6,000 accounts for civil servants of the Hamas-led government and that it plans to soon establish correspondent relations with foreign banks (no specific banks were named). He claimed that Hamas plans to pay its monthly salaries through his institution and that utility payments can be made there as well. Fuel sector executives in Gaza told Econoff on April 23 that most, if not all, Hamas civil servants in Gaza will open INB accounts because Hamas will pay salaries through it. At the April 22 event, Al-Rafati said that INB is a private bank with 17 investors, and claimed to have USD 20 million in capital, though various press reports indicate that INB has only been able to gather between USD one and three million. PMA calls "INB" illegal -------------- ¶4. (C) The PMA and Capital Markets Authority (CMA) issued public notices in local newspapers and on the radio in recent months stating that INB is an illegal entity and warned the public against doing business with it. According to the notices, INB has not applied for a PMA banking license and did not submit a request to the CMA to begin public offering procedures, as required by PA law. PMA Governor Jihad al-Wazir told Econoffs recently that he will actively and publicly speak out against Hamas efforts to portray the "bank" as legitimate. In a meeting with the Consul General on April 16, he scoffed at the INB's claims of being a full service bank, calling it a "glorified moneychanger" operation. Press reports from April 22 also quoted PMA officials as saying that they would take legal action in coordination with the Attorney General's office against INB. ¶5. (C) Bank of Palestine CEO Hashim Shawa told Econoff on April 23 that INB's creation was prompted by the lack of currency in Gaza bank branches, just as INB's Al-Rafati stated repeatedly in his April 22 speech. Shawa noted that Al-Rafati announced that the "PA in Ramallah has failed to support the banking system in Gaza" and that "Gazans have not trusted the Gaza banks because they are all managed by those in the West Bank." WALLES