By Stephen Lendman
Wall Street does it. Other Western banks do it. They all exploit markets, often ripping off customers illegally. Why not Israeli banks also in their own back yard, easily in expanding settlements.
The Coalition of Women for Peace (CWP) includes 10 feminist organizations and non-affiliated activist women in Israel. Founded in 2000, it advocates "radical social and political change," and is "a leading voice against the occupation, committed to feminist principles of organizing and Jewish-Palestinian partnership in a relentless struggle for a just peace."
In October, it released a report titled, "Financing the Israeli Occupation, The Direct Involvement of Israeli Banks in Illegal Settlement Activity and Control over the Palestinian Banking Market."
Besides stealing Palestinian land, economic interests play a large role in Israel’s occupation, including resource control, labor exploitation, and commercial enterprises of all kinds, operating freely and illegally in settlements, banks among them.
Israeli banks profiteer several ways discussed below, but make no mistake. Like in the West, they’re predators, especially in Occupied Palestine, permitted to steal and exploit because what say have occupied people. As a result, banks (construction companies, and other commercial enterprises) breach international law as participants in illegal projects, a lucrative profit center they freely exploit.
To encourage migration, Israel offers generous benefits and incentives, most settlements given National Priority Area A status, entitling them to:
— quality, low-cost housing with subsidized mortgages;
— free education from age three and extended school days;
— free transportation to and from schools, and higher teacher salaries to attract qualified ones to move;
— for industry and agriculture, grants and subsidies, indemnification from EU produce tariffs, significantly lower taxes than inside the Green Line; and
— larger balancing grants to help settlements cover deficits.
In all aspects of finance, Israel banks are involved, profiteering from an expanding market six ways:
(1) Providing mortgages to homebuyers
Six large Israeli banks provide them – Bank Hapoalim, Leumi Mortgage Bank (of Bank Leumi), Mizrahi Tefahot Bank, Discount Mortgage Bank (of Israel Discount Bank), The First International Bank of Israel (FIBI), and Jerusalem Bank. All offer mortgages in the West Bank, East Jerusalem, and Golan, seized from Syria in 1967. By so doing, they actively participate illegally in Israel’s occupation.
Moreover, as lenders, they’re also owners until mortgages loans are repaid, and if not, they seize properties in default, making banks sole owners of illegal ones on stolen land, becoming more than ever criminally complicit.
(2) Providing overall settlement financing
Israeli housing construction projects (in Israeli and the Territories) depend heavily on loans from inception through completion. They’re provided under special terms known as "accompaniment agreements" (Heskem Livui). Moreover, they’re regulated by the Sale of Apartments Law (Assurance of Investments for Apartment Buyers) and under Bank of Israel management regulations. They’re also supervised by the Israeli Ministry of Construction and Housing.
These agreements are crucial. Without them, completion of many projects might be jeopardized. Under their provisions, the accompanying bank holds property as collateral until housing units find buyers. Construction companies, in turn, get a reliable source of financing, including credit and guarantees on projects undertaken.
Prior to an agreement, special bank officers evaluate a project’s profitability. If approved, development is monitored from start to finish, and banks also are involved in determining prices for finished properties. In addition, homebuyer payments are deposited in special accounts, exclusively for that purpose, controlled by accompanying banks to manage all related financial transactions.
In 2008, the Sale of Apartments Law was amended, tightening oversight of accompaniment agreements after fraud was exposed in a case called the Heftziba Affair. It involved one of Israel’s largest construction companies – Heftziba.
Specializing in low-cost housing, it went bankrupt, after which its owner, Boaz Yona, was convicted of fraudulently stealing millions of dollars from unwary clients, without providing promised apartments. As a result, the amended Law requires an appointed Ministry of Construction and Housing commissioner, responsible for the registration and management of accompaniment agreements. The appointee must then submit an annual activity report to the Knesset Finance Committee.
In practice, however, agreements are privileged information between banks and construction companies, unavailable to the public. As a result, the 2009 report omitted privileged details, making it of little value. CWP appealed to the Ministry of Construction under Israel’s Freedom of Information Act. Established by its Freedom of Information Law, it’s, in fact, weak legislation, exempting many public agencies from complying, especially on security related issues. As a result, sanctions are seldom imposed, and appeals rarely upheld.
In response to CWP’s effort, the Ministry declined, saying it lacked the requested information, whether or not true. As a result, CWP got what it could from banks and construction companies directly. They, of course, withhold vital details freely if they choose.
(3) Providing financial services to Settlement Authorities
Like settlements, local and regional councils and municipalities connected to them require financing for infrastructure, other projects, and essential services. Banks provide it for greater profits, including through loans, managing accounts, and other services.
Loans finance activities and establish enduring relationships, their provisions making banks investors in continued development and settlements growth, producing reliable income streams and greater profits. Overall, hundreds of millions of dollars are involved for projects ranging from a few to up to 99 years duration, supplement by new ones as settlements expand.
(4) Occupied Territory branch banking
Besides financing, all major commercial banks service private customers through West Bank, East Jerusalem and Golan branches – the more settlers, the more customers, and the more branch banks, the more strengthened Israel’s settlement project becomes.
According to Bank of Israel data, 34 branches operate in settlements, providing the same services as throughout Israel, including personal and business accounts, mortgage and other lending, credit cards, and other financial services, all of it profiteering illegally.
(5) Business Lending
Occupation is profitable, including for many Israeli and international commercial enterprises. They also need financing to grow. Banks provide it. CWP learned that "all Israeli commercial banks provide business loans for companies that are directly and clearly involved in the occupation." In other words, they operate illegally in the settlements, and they know it.
(6) The relationship between Israeli banks and the Palestinian banking market
By agreement between Israel and the Palestinian Authority (PA), only the shekel, dollar, euro and Jordanian dinar are used. The shekel, in fact, increases the Palestinian economy’s subordination to Israel’s much larger one.
The shekel’s market share depends on several factors, including taxes, mainly from customs, and the VAT. In addition, most Palestinians with jobs work in settlements, and Israel has a thriving export and import market. The trade balance is illustrative. Of about 20 billion annual shekel transfers, 80% accrue to Israel.
Moreover, Palestinian banks have no direct access to the shekel clearing house, so must buy services from Israeli banks, mainly Bank Hapoalim and Discount Bank. However, arrangements impose "several limitations and have severe implications on the" cost burden Palestinian banks must bear.
Under established arrangements, Israeli banks demand collateral deposits of over one billion shekels (over 212 million euros), earning no interest. In addition, they charge high commissions, increasing costs and risks for their Palestinian counterparties. As a result, Palestinian banks incur deficits in the arrangement, impeding their development, and for some their viability.
Moreover, only some Palestinian banks may transfer shekels to Israeli banks. Newer ones are excluded to obstruct their ability to operate. In addition, the Bank of Israel controls monetary policy, including the amount issued, interest charged, inflation-targeting, foreign currency purchases, and export policies favoring Israel, not Palestine. Overall, Palestinian banks face enormous burdens, unfairly imposed to disadvantage them.
A Final Comment
Nearly all Israeli commercial banks exploit the Territories freely, effecting erasing the Green Line financially and commercially. Israeli and international enterprises are advantaged at the expense of Palestinian ones.
By profiteering from occupation, these banks bear direct responsibility and must "be held accountable for their role in the financing of economic activity which sustains continued Israeli control" illegally. They also perpetuate the Palestinians’ enormous burden under "unjust conditions," ones demanding redress.
– Stephen Lendman lives in Chicago. He contributed this article to PalestineChronicle.com. Contact him at: email@example.com and visit his blog at: sjlendman.blogspot.com.