( Reuters ) - Israel's biggest commercial bank said on Tuesday it was severing business ties with Palestinian banks in the Gaza Strip in response to the Israeli government's classification of the territory as an enemy entity.
The decision could deepen economic hardship among Gaza's 1.5 million residents. Israeli currency is used by President Mahmoud Abbas's Western-backed government in the West Bank to pay salaries to its employees in the Hamas-controlled Gaza Strip.
A Palestinian banking official said Bank Hapoalim's move could force Gaza banks to shut down if other Israeli institutions follow suit and stop transferring shekel notes to them.
"In light of the government's decision to declare the Gaza Strip hostile territory, Bank Hapoalim has decided to terminate its banking activity with banks and branches in the Gaza Strip," the Israeli bank said in a statement.
A Hapoalim spokeswoman said it would take several weeks for the bank to cease completely what she described as "minimal services" to Gaza's financial institutions.
Sami Abu Zuhri, a Hamas official, called the move "a grave decision" that would have a strong impact on life in the Gaza Strip.
Israel Discount Bank, also a main provider of shekels and services to Palestinian banks, said the issue of severing ties with Gaza was under discussion "but we have not reached a decision".