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Bank Hapoalim Ltd., Israel's second-biggest lender by assets, is severing ties with banks in the Gaza Strip in response to the Israeli government's classification of the area as a "hostile" territory.
"In light of the government's decision to declare the Gaza Strip hostile territory, Bank Hapoalim has decided to halt all bank activities with banks and branches in the Gaza Strip," the bank said Tuesday.
It could take up to a month to completely cease services to Gaza's financial institutions. "We have correspondence with the banks there (in Gaza) doing all different things, just like we have with banks all over the world, and now we are stopping all of our activities with Gaza," a Hapoalim spokeswoman said. "Some of the banking activities will be stopped immediately and some will be stopped within 30 days, but I think that everything will be stopped before that time."
The decision could restrict the supply to Gaza of the shekel, which is the official currency of the governing Palestinian Authority.
Hamas spokesman Fawzi Barhoum called Hapoalim's decision part of a strategy of "collective punishment" against Gaza residents and said it isn't connected with the rocket salvoes.
Israel declared the Gaza Strip a "hostile territory" last Wednesday and said it would reduce its fuel and power supplies to the territory in response to rocket attacks by Hamas. It has yet to carry out any cuts and has pledged to keep humanitarian aid flowing.
According to Bank of Israel spokesman Yossi Sa'adon, the central bank was informed of the decision by Hapoalim, but its approval was not necessary for the move.
"We can't stop them from making this decision - this has no connection to the Bank of Israel and the thought process to do this began when the government declared Gaza a hostile territory. We think that Bank Discount [the only other Israeli bank with ties to Gaza] will make a similar decision," he said.
Bank Discount spokeswoman Sarit Weiss told The Jerusalem Post the bank is now deciding whether or not to sever its Gazan ties and will have a decision shortly.
Most Israeli financial institutions that conduct transactions with Gaza have used Hapoalim and Discount to act on their behalf.
The cessation of banking services in the Gaza Strip is an additional blow to the already weak Gazan economy. Since the violent Hamas takeover on June 12, the Karni crossing, which had served as the primary passageway of goods into and out of Gaza, has been open only for the transfer of humanitarian necessities, costing the Gazan economy millions of dollars. Israel and the PA continue to search for a viable alternative to Hamas personnel manning the border crossings. Prior to Hamas's takeover, the Fatah-led PA was responsible for operating the crossings.
The biggest banks in the Gaza Strip are the Bank of Palestine and Amman, Jordan-based Arab Bank Plc. Bank of Palestine has eight branches in Gaza while Arab Bank has four branches, according to their Web sites.
Bloomberg contributed to this report.