Financing the Israeli Occupation

The Current Involvement of Israeli Banks in Israeli Settlement Activity

Who Profits' new flash report reveals that all the Israeli banks are still heavily involved in financing Israeli settlements, providing services to settlements and financially supporting construction projects on occupied land.

In October 2010, Who Profits published a report about the Israeli banks' involvement in the Israeli occupation. The Israeli banks provide the financial infrastructure for activities of companies, governmental agencies and individuals in the occupied Palestinian territories and the Syrian Golan Heights. As Who Profits' report shows, it is evident that the banks are well aware of the types and whereabouts of the activity that is being carried out with their financial assistance.

Who Profits' research identified six categories of involvement of Israeli banks in the occupation:

1. Providing mortgage loans for homebuyers in settlements

Israeli banks provide mortgages to individuals who wish to buy or build housing units in West Bank settlements. The purchased property is used as collateral for the loan. Thus, the bank is facilitating the colonizing of land and is a stakeholder in a settlement property and, in cases of foreclosure, it may fully own that property.

To name a few examples, Leumi Bank provides mortgages for homebuyers in the settlements of Zufim, Ariel and Beitar Ilit; Mizrahi-Tefahot bank provides mortgages for homebuyers in the settlements of Ariel, Beit Arye (Ofarim), Beitar Ilit, Imanuel and Modi'in Ilit. 

2. Providing financial services to Israeli local authorities in the West Bank and the Golan Heights

Regional councils, local councils and municipalities of Israeli settlements in the occupied West Bank and the Golan Heights form part of the associated regime and administer the settlements. The authorities of this regime depend on financial services provided by Israeli banks. Israeli banks provide loans to local authorities of settlements, which are used for development of infrastructure, construction of public buildings and providing municipal services to the settlements' residents. Additional services to these local authorities include managing bank accounts, the provision of funds' management services and funds' transfer from the government and from other sources, such as grants from the Israel National Lottery (Mifal HaPayis). All grants given by the Israeli National Lottery to dozens of settlements are transferred through Dexia Israel bank. 

Dexia Israel also provided a loan for waste management systems in the settlement of Bat Ayin, and a guarantee for a project of the Israeli Ministry of Defense to install lighting around Kdumim settlement. In addition, Gush Etzion regional council receives its State funds through Dexia Israel. 

3. Providing special loans for construction projects in settlements 

Israeli banks provide loans for various construction firms for the explicit purpose of constructing housing projects in West Bank settlements. The Sale (Apartments) (Assurance of Investments of Purchasers of Apartments) Law - 1974 ensure homebuyers that a bank vouches for construction project, backs the construction company and protects the buyers' investments by providing a bank guarantee. Homebuyers' payments for the property are all deposited in a dedicated bank account, and the bank monitors the financial status and the development of the project. 

Hapoalim and Leumi banks acted as a guarantor and loan maker to major construction companies such as Heftziba and Shikun & Binui (Housing and construction) that built projects in the settlements of Ma'ale Adumim and Har Homa. These banks also guarantee the state loans to companies that built the Light Rail in Jerusalem, which connects the Jerusalem settlement neighborhoods with the city center. 

4. Operating branches in Israeli settlements

Most of the Israeli banks have several branches in Israeli settlements, through which they provide financial services to settlers and commercial companies in settlements. The bank branches form part of the settlement itself, and are part of the service infrastructure that enables the continued development of the settlements.

5. Providing financial services to businesses in settlements

Israeli banks provide financial services to businesses in the settlements and to businesses whose entire commercial activity is occupation-related. For instance, Israeli banks provide loans and offer bank accounts to factories located in settlements industrial zones. The property of these businesses is often used as collateral for such loans. For example, Mizrahi Bank's subsidiary, British-Israel investments, owns and operates Adumim Mall in the settlement of Ma'ale Adumim. 

6. Benefiting from access to the Palestinian monetary market as a captured market

Restricted by the agreements between the PA and Israel, as part of the Oslo process (e.g. The Paris protocol - the economic annex to the Oslo Accords) - the Palestinian monetary market cannot operate a currency of its own. While there are four currencies that can be used in the Palestinian market (Israeli shekel, EU euro, Jordanian dinar and US dollar), the Israeli shekel dominates most of this market, as a derivative of the subordination of the entire Palestinian economy to that of Israel's. Palestinian banks have to rely on Israeli banks, which serve as correspondence banks, for the transference of funds and Shekel clearing services. However, according to official Palestinian sources, in order to provide these services, Israeli banks demand high cash collaterals of over a billion Shekels, charge high commissions and pose limitations on money transfers. In addition, Israeli banks work only with some of the Palestinian banks; they refuse to work with new banks, which become dependent on other Palestinian banks. Moreover, Israeli banks severed their contractual connections with the Palestinian banks in Gaza and stopped providing any services to them. This had a significant impact on the financial market in Gaza bringing it to the brinks of a total collapse.

The six categories of activity specified herein portray the extent in which banks in Israel are implicated in financing of occupation-related endeavors. In a more general perspective, it can be stated that all aspects of Israeli control over the occupied territory have a financial foundation. Many financial activities of individuals, organizations, governmental institutions and commercial companies could not have taken place without the active support of banks. The findings show that Israeli banks are still benefiting from financial activities in the occupied territories, especially in the settlements industry.