{
  "title": "West Bank and Gaza: Selected Issues",
  "publication": "IMF Staff Country Reports, September 16, 2022",
  "sourceUrl": "https://www.imf.org/en/publications/cr/issues/2022/09/15/west-bank-and-gaza-selected-issues-523402",
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  "summary": "For more than a decade, commercial banks in West Bank and Gaza (WBG) have struggled to manage buildups of excess physical Israeli shekel cash.",
  "sections": [
    {
      "heading": "Summary findings",
      "content": "- For more than a decade, commercial banks in West Bank and Gaza (WBG) have struggled to manage buildups of excess physical Israeli shekel cash.\n- Banks elsewhere typically manage the amount and currency composition of physical cash they hold in their vaults through transactions with other commercial banks and central banks.\n- The two Israeli banks that currently offer correspondent services to banks operating in WBG no longer offer them cash services, citing money laundering and terrorism financing (ML/TF) concerns.\n- The Bank of Israel (BoI) has imposed limits on the amount of shekel coins and notes it accepts back from Palestinian banks.\n- Limits on cash repatriation and the loss of correspondent cash services have long hindered liquidity management and been a drag on the profitability of Palestinian banks.\n- Periodic large increases in excess cash in recent years have created additional risks and raised the costs to the Palestinian banking system."
    },
    {
      "heading": "Background and context",
      "content": "- Subject labels: Crime, Financial institutions, Financial markets, Financial services, International organization, Monetary policy.\n- Keywords: Anti-money laundering and combating the financing of terrorism (AML/CFT), cash in West Bank, cash shipment, Commercial banks, Correspondent banking, excess cash, Financial inclusion, Global, Middle East, North Africa, Palestinian banking system, shekel cash."
    },
    {
      "heading": "Risks and operational implications",
      "content": "- Excess physical shekel cash buildup undermines routine liquidity management practices used elsewhere (interbank and central bank transactions).\n- ML/TF-related withdrawal of correspondent cash services by the two Israeli correspondent banks has reduced options for Palestinian banks to rebalance currency holdings.\n- BoI limits on accepting shekel coins and notes back from Palestinian banks constrain cash outflows back to issuer, increasing on-balance-sheet cash holdings.\n- Periodic large increases in excess cash raise financial-system risks and increase operating costs for the Palestinian banking system.\n\n---\n\n Content in this bundle\n\n- West Bank and Gaza: Selected Issues; September 16, 2022\n  - West Bank and Gaza: Selected Issues; September 16, 2022 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - West Bank and Gaza: Selected Issues; September 16, 2022 (PDF){rel=\"external\" type=\"application/pdf\"}"
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    "Published: September 16, 2022",
    "Series: IMF Staff Country Reports",
    "DOI: https://doi.org/10.5089/9798400220166.002",
    "For more than a decade, commercial banks in West Bank and Gaza (WBG) have struggled to manage buildups of excess physical Israeli shekel cash.",
    "Banks elsewhere typically manage the amount and currency composition of physical cash they hold in their vaults through transactions with other commercial banks and central banks.",
    "The two Israeli banks that currently offer correspondent services to banks operating in WBG no longer offer them cash services, citing money laundering and terrorism financing (ML/TF) concerns.",
    "The Bank of Israel (BoI) has imposed limits on the amount of shekel coins and notes it accepts back from Palestinian banks.",
    "Limits on cash repatriation and the loss of correspondent cash services have long hindered liquidity management and been a drag on the profitability of Palestinian banks.",
    "Periodic large increases in excess cash in recent years have created additional risks and raised the costs to the Palestinian banking system.",
    "Subject labels: Crime, Financial institutions, Financial markets, Financial services, International organization, Monetary policy.",
    "Keywords: Anti-money laundering and combating the financing of terrorism (AML/CFT), cash in West Bank, cash shipment, Commercial banks, Correspondent banking, excess cash, Financial inclusion, Global, Middle East, North Africa, Palestinian banking system, shekel cash.",
    "Excess physical shekel cash buildup undermines routine liquidity management practices used elsewhere (interbank and central bank transactions).",
    "ML/TF-related withdrawal of correspondent cash services by the two Israeli correspondent banks has reduced options for Palestinian banks to rebalance currency holdings.",
    "BoI limits on accepting shekel coins and notes back from Palestinian banks constrain cash outflows back to issuer, increasing on-balance-sheet cash holdings.",
    "Periodic large increases in excess cash raise financial-system risks and increase operating costs for the Palestinian banking system.",
    "**West Bank and Gaza: Selected Issues; September 16, 2022**"
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