Finance Minister Bezalel Smotrich on Thursday condemned the country's banks that have refused to provide services to settlers sanctioned by the European Union and warned they may have to pay compensation to them.
In a letter sent to Israel's banking supervisor, Danny Hahiashvili, Smotrich demanded that the Bank of Israel ensure continued banking services for Israeli settlers targeted by international sanctions. The move is seen as an attempt to interfere with the independent judgment of the country’s central bank, which operates autonomously by law and is not subordinate to the finance minister or the government.
In his letter, Smotrich urged that banks be prevented from cooperating with sanctions imposed by foreign governments. He wrote that “responsible risk management cannot ignore the severe price of complying with sanctions on law-abiding Israeli citizens acting on behalf of the state. It is unacceptable for banks to ‘play it safe’ and abandon their customers without lifting a finger.”
The letter comes amid reports that several European Union countries are considering imposing personal sanctions on Israeli citizens living in the West Bank.
Smotrich called on Israeli banks to use their legal, financial, and international clout to fight what he described as “unjust” sanctions. He suggested measures such as legal action in European courts, diplomatic pressure, and public protest. “The banks’ massive profits allow them to take calculated risks for their clients—especially when it comes to a national moral injustice,” he wrote. He further warned that if banks continue to blindly comply with sanctions and harm their customers, he would move forward with legislation requiring them to pay significant compensation to those affected.
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Smotrich also said that if Israel’s banking system fails to provide adequate service, he would push to require the Bank of Israel itself to open accounts for sanctioned citizens, framing the move as a matter of national sovereignty and protection of Israeli citizens. “The State of Israel will not tolerate foreign interference in its internal affairs, and certainly will not abandon its loyal citizens in the face of international delegitimization,” he wrote.
Last year, U.S. authorities imposed restrictions on seven settlers accused of acts considered terrorism against Palestinian civilians. Those sanctions were lifted several months later.
In response, the Bank of Israel said: “Maintaining the banking system’s compliance with internationally accepted standards is essential for preserving Israel’s international standing and, by extension, the entire economy. The Banking Supervision Department will soon publish a draft directive aimed at balancing the need to uphold the rights of sanctioned customers with the obligation to meet international standards, as has been required of banks over the past two years. We emphasize that this issue is best resolved through diplomatic channels.”