Samer Choucair: Threats to End Correspondent Banking Ties Are Redrawing the Risk Map Across Regional Markets
Entrepreneur Samer Choucair said threats to terminate correspondent banking relationships between Israeli and Palestinian banks represent a new test of how investors assess geopolitical risk in the Middle East, after Bank Hapoalim and Israel Discount Bank informed their Palestinian counterparts that they intended to end correspondent banking services within weeks.
Choucair explained that such a move could isolate the financial system in the West Bank from both the Israeli and global banking systems.
The two institutions process annual transactions estimated at approximately 51 billion shekels, equivalent to around $16.5 billion. These transactions form the backbone of imports of food, fuel, electricity, and water, while approximately 90% of Palestinian exports pass through Israel.
He added that these developments provide institutional investors with a practical example of how political risk can affect capital movement, potentially influencing the stability of Israeli markets, regional risk premiums, and the redirection of investment flows toward more stable Gulf economies.
The Palestinian financial system faces a critical test
Samer Choucair noted that the Palestinian economy relies heavily on the Israeli shekel as a medium of exchange and on Israeli banks as the principal channel connecting it to the global financial system.
He explained that the loss of these links could disrupt payment settlements, wage transfers, and the financing of essential imports, potentially encouraging a wider shift toward informal cash transactions.
Choucair added that the Palestine Monetary Authority had warned that the termination of banking relationships could bring trade and supply chains to a near standstill.
It could also increase regional money-laundering and terrorist-financing risks if part of the financial activity moved into less regulated channels.
Political tensions place pressure on the economy
Samer Choucair said these developments come amid tensions that have persisted since October 2023.
Successive Israeli policies, including the withholding of tax revenues and restrictions on work permits, have contributed to a contraction in the Palestinian economy compared with pre-crisis levels.
He explained that the Israeli banks had justified their position by citing increased legal exposure to possible claims involving money laundering or terrorist financing, alongside the absence of sufficient and lasting legal protection from the Israeli government.
Choucair added that the situation demonstrates how regulatory and legal risks have become central to the decisions of financial institutions, even when they involve banking relationships that have existed for many years.
Israeli banks come under investor scrutiny
Samer Choucair noted that institutional investors are closely monitoring the potential impact of these developments on Israel’s banking sector.
He explained that Bank Hapoalim, with a market capitalization of approximately $31 billion, and Israel Discount Bank, valued at around $12 billion, are both significant components of the banking index on the Tel Aviv Stock Exchange.
Choucair added that any actual escalation could lead investors to reassess the risk premium applied to the Israeli banking sector, particularly given the continuing links between Israel’s economy and the movement of trade and labour across the West Bank.
Geopolitical risk spreads into financial markets
Samer Choucair said institutional investors no longer view the potential termination of correspondent banking ties as merely a local event.
Instead, they regard it as an indicator of how rapidly geopolitical risks can spread into bank balance sheets and financial markets.
He explained that capital allocation in the current environment requires greater emphasis on assets supported by strong sovereign buffers and possessing a greater capacity to remain insulated from disruption to supply chains and cross-border financial relationships.
Choucair added that any broad shift toward cash-based transactions could generate local inflationary pressure, increase import costs, weaken purchasing power, and worsen unemployment.
Regional implications for capital flows
Samer Choucair noted that the potential consequences could extend across regional markets through higher risk premiums on sovereign bonds and other Middle Eastern financial assets, particularly if the effects of the crisis spread to energy or logistics.
He explained that investors pursuing geographic diversification could benefit from a reallocation of capital toward Gulf economies offering stronger institutional stability and more diversified financial systems.
Choucair added that Israeli markets have so far shown only limited volatility in banking indices, although the implementation of any decision to terminate correspondent relationships could prompt a repricing of operational and compliance risks.
New opportunities in financial technology
Samer Choucair said the current pressures are creating investment opportunities in financial technology and alternative cross-border payment solutions.
He explained that Gulf economies, particularly Saudi Arabia under Vision 2030, are developing more independent financial infrastructure capable of attracting capital from higher-risk regions.
Choucair added that institutional investors are placing greater value on markets capable of transforming institutional stability and financial governance into long-term competitive advantages.
He emphasized that allocating capital toward economies with robust financial systems and diversified banking networks has become a strategic priority for funds managing long-term assets.
The importance of international intervention
Samer Choucair explained that investors will continue monitoring developments surrounding Israeli legal exemptions and any potential intervention by the World Bank, the International Monetary Fund, or Western governments.
He added that these factors will determine whether the situation moves toward a temporary arrangement that eases short-term pressure or develops into a deeper structural crisis affecting the regional financial system.
A global shift in banking-risk management
Samer Choucair noted that the crisis reflects a broader global trend toward greater sensitivity among banks to legal and compliance risks in complex geopolitical environments.
He explained that the Middle East increasingly needs to develop domestic financial systems capable of reducing dependence on a limited number of external correspondent banks.
Choucair added that private investment funds and venture capital firms may find new opportunities in financing technological solutions for payments and trade or in developing alternative supply chains across neighbouring markets.
Gulf financial infrastructure becomes more attractive
Samer Choucair said rising risks in parts of the Middle East strengthen the investment appeal of digital and financial infrastructure in Saudi Arabia and the United Arab Emirates.
He explained that economic-diversification efforts, combined with the growing role of the digital economy and artificial intelligence, are providing new tools for addressing traditional constraints on financial flows.
These developments, Choucair added, could make Gulf markets increasingly attractive to capital seeking stability and resilience.
A strategic outlook for investors
Concluding his remarks, Samer Choucair said markets would continue monitoring negotiations between Israeli banks and financial authorities over the future of correspondent banking relationships during the coming weeks.
He explained that if temporary arrangements were reached through the end of 2026, short-term pressure could decline, although the underlying structural risks would remain.
Choucair added that investors need to reassess their portfolios and focus on assets positioned to benefit from the repricing of regional risk, while giving priority to governance and financial resilience.
Samer Choucair emphasized that strategic investment in markets with strong institutional frameworks and the capacity to absorb external shocks will be the most important factor in generating sustainable returns.
He concluded that the crisis surrounding Israeli-Palestinian banking relations extends far beyond a local dispute and has become an indicator of how capital flows across the Middle East could be reshaped in the years ahead.