Financing

Financing the Israeli Occupation 2010

Who Profits from the Occupation 1

The Direct Involvement of Israeli Banks in Illegal

Israeli Settlement Activity and Control over the

Palestinian Banking Market

Who Profits from the Occupation

October 2010

Financing the Israeli Occupation 2010

Who Profits from the Occupation 2

The Coalition of Women for Peace

brings together ten feminist peace organizations and non-affiliated activist women in

Israel. Founded soon after the outbreak of the Second Intifada in 2000, CWP today is

a leading voice against the occupation, committed to feminist principles of organizing

and Jewish-Palestinian partnership in a relentless struggle for a just peace. CWP

continuously voices a critical position against militarism and advocates for radical

social and political change. Its work includes direct action and public campaigning in

Israel and internationally; a pioneering investigative project exposing the occupation

industry; outreach to Israeli audiences and political empowerment of women

across communities; and, capacity-building and support for grassroots activists and

initiatives for peace and justice.

Who Profits from the Occupation

is a research project of the Coalition of Women for Peace. Initiated in response to the

Palestinian call for boycott, divestment and sanctions (BDS) on Israel, this research

project is dedicated to exposing the commercial involvement of Israeli and international

companies in the continuing Israeli control over Palestinian and Syrian land. The

project publishes information about these companies on its website (www.whoprofits.

org), produces in-depth reports and serves as an information center.

3 Yegia Kapayim St., Tel Aviv, Israel

P.O.Box 29214, Tel Aviv 61292, Israel

Tel: 972-3-5281005

E-mail: whoprofits@yahoo.com

Table of Contents

Executive Summary

4-5

Introduction: The Israeli Banks

6-8

Methodology

8

1. Mortgages for Homebuyers in the Occupied Territories

9-11

2. Providing Financial Services to Local Authorities of Settlements

12-15

3. Providing Dedicated Loans for Construction Projects in Settlements

16-17

Special Focus: Dexia Israel

18-20

4. Branches of Banks on Occupied Land

21-23

5. Loans for Businesses

24-26

6. The Israeli Banks and the Palestinian Banking Market

28-29

Conclusion

30-31

Appendix A: List of Activities of Each Bank

33

Appendix B: The banks: an overview

34-40

Appendix C: Responses by the Banks

41

Financing the Israeli Occupation 2010

Who Profits from the Occupation 4

Israeli banks provide the financial infrastructure

for all activities of companies, governmental

agencies and individuals in the continuing

occupation of Palestine and the Syrian Golan

Heights. The services provided by the banks

support and sustain these activities. Additionally,

as this report shows, it is evident that the banks

are well aware of the types and whereabouts

of the activity that is being carried out with their

financial assistance.

Our research has identified six categories of

involvement of Israeli banks in the occupation.

There is solid evidence of the involvement of

most of the major Israeli commercial banks in

these categories¹:

Providing mortgage loans 1. for homebuyers

in settlements

Israeli banks provide mortgages to individuals

who wish to buy or build housing units in West

Bank settlements. The purchased property is

used as collateral for the return of the loan,

as is standard with mortgage loans. Thus, the

bank that provided the loan is a stakeholder

in a real estate property in a settlement and,

in cases of foreclosure, the bank may end up

fully owning that property.

2. Providing special loans for building

projects in settlements

Israeli banks provide loans for various

construction firms for the explicit purpose of

constructing housing projects in Israeli West

Bank settlements. These are loans provided

under terms which are regulated through

“accompaniment agreements” (Heskemay

Livuy), certain aspects of which are regulated

under the Sale (Apartments) (Assurance of

Investments of Purchasers of Apartments)

Law - 1974. The relevant articles in the

Sale Law ensure homebuyers that a bank

vouches for the construction project, backs

the construction company and protects

the buyers’ investments by providing the

purchasers with a bank guarantee. In some

cases, the accompanying bank also holds

the real estate property as collateral until all

of the housing units in the project are sold

to buyers. Homebuyers’ payments for the

property are then all deposited in a dedicated

bank account in the accompanying bank, and

the bank monitors the financial status as well

as the development of the project.

3.

Providing financial services to Israeli

local authorities in the West Bank and the

Golan Heights

Regional councils, local councils and

municipalities of Israeli settlements in the

occupied West Bank and the Golan Heights

depend on the financial services provided

by Israeli banks. Most importantly, Israeli

banks provide loans to the local authorities

of settlements, loans which are used for the

development of infrastructure, the construction

of public buildings and for providing municipal

services to the residents of these settlements.

Additional services to these local authorities

include managing bank accounts, the

provision of fund management services and

the transfer of funds from the government

and other sources, such as grants from the

Israel National Lottery (Mifal HaPayis), to local

authorities for the construction of schools,

community centers and the like.

4.

Operating branches in Israeli settlements

Most Israeli banks have several branches in

Israeli settlements. Through these branches

the banks provide financial services to settlers

and to commercial companies in settlements.

The bank branches are part of the service

infrastructure that enables the continued

development of the settlements.

Executive Summary

¹ Although not all of them are involved in all six categories.

Financing the Israeli Occupation 2010

Who Profits from the Occupation 5

Providing financial services

5. to businesses

in settlements

Israeli banks provide financial services

to businesses in the settlements and to

businesses whose entire commercial activity

is related to the occupation. For instance,

Israeli banks provide loans and offer bank

accounts to factories which are in the

industrial zones of settlements or whose

main area of activity is the construction of

settlements or infrastructure projects for the

use of Israelis in the occupied area. The

property of these businesses in the occupied

area is, many times, used as collateral for

such loans.

6.

Benefiting from access to the Palestinian

monetary market as a captured market

Restricted by the agreements which were

signed between the Palestinians and the

Israelis as part of the Oslo process, the

Palestinian monetary market cannot operate

a currency of its own. Palestinian banks

are therefore dependent on other banks for

the provision of financial services. While

there are four currencies that can be used

in the Palestinian market (Israeli shekel,

EU euro, Jordanian dinar and US dollar),

the Israeli shekel dominates most of this

market because of the subordination of the

Palestinian market to that of Israel. As is

most often the case with non-Israeli banks

that deal with the Israeli shekel, Palestinian

banks have to rely on Israeli banks, which

serve as correspondence banks, for the

transfer of funds and shekel-clearing services.

However, according to official Palestinian

sources, to provide these services, the Israeli

banks which supply them demand high cash

collaterals, of more than a billion shekels in

total, which are deposited, by the Palestinian

banks, in the Israeli banks. Additionally, the

Israeli banks charge high commissions for

these services and impose limitations on the

transfer of money, both of which increase

the costs of such operations and the risks

involved for the Palestinian banks. It should

be noted that the Israeli banks are only willing

to work with some of the Palestinian banks;

the banks refuse to include the newer banks

in these agreements. Due to this restriction,

the ability of the newer Palestinian banks

to operate is severely impaired, since they

cannot directly transfer shekels to the Israeli

banks and, thus, become dependent on

other Palestinian banks. Consequently, this

restriction hinders the ability of the Palestinian

monetary market to grow and develop.

Additionally, as of the end of 2008, Israeli

banks have severed their contractual

connections with the Palestinian banks in

Gaza and stopped providing any and all

services to them. This has had a significant

impact on the financial market in Gaza,

bringing it to the brink of total collapse.

The six categories of activity specified herein clearly

portray the scope and extent to which banks in

Israel are implicated in the financing of occupationrelated

endeavors. It is evident that Israeli banks

provide the financial basis for the construction of

settlements, for the sustainability and maintenance

of the settlements and for Israeli commercial activity

in the occupied territory. Our report clearly illustrates

that Israeli banks do not only provide these services

and enable these activities, but are also fully aware

of the type of activities for which they provide

financial support. In addition, Israeli banks reap

financial benefits for Israeli financial institutions from

the subordination of the Palestinian financial market

as a captured market.

In a more general perspective, it can be stated

that any and all aspects of Israeli control over

the occupied territory have a financial foundation

and that none of these financial activities

of individuals, organizations, governmental

institutions and commercial companies could

take place without the active support of banks.

The findings of this research show that as the

providers of these services, Israeli banks are

principle beneficiaries of financial activity in

the illegal Israeli settlements in the occupied

territories and in Israeli control over the

Palestinian financial market.

Financing the Israeli Occupation 2010

Who Profits from the Occupation 6

In analyzing the types of activities of Israeli

banks in the occupation, we focused on six

categories. While the involvement of banks

can unquestionably be found in many of the

occupation-related economic activities, the

current report focuses on activities in which the

involvement of the banks is explicit, unambiguous

and well documented. By focusing on these

types of activities we hope to prove that banks

knowingly and actively provide financial services

to commercial endeavors that are explicitly

part of Israeli control over occupied territory

or are directly involved as economic players

themselves. While not all banks are involved

in all six categories, there is solid evidence for

the involvement of most of the major Israeli

commercial banks in most categories. A table

summarizing the categories of activity for each of

the banks can be found in Appendix A.

There are five categories of operation in

which Israeli banks provide financial services

to occupation-related activity: banks give

mortgage loans for homebuyers in settlements;

they provide financial services to Israeli local

authorities in the West Bank and the Golan

Heights; banks offer special loans for building

projects in settlements; they operate branches

in Israeli settlements; and they provide

financial services to businesses in settlements.

Additionally, two Israeli banks, Bank Hapoalim

and Discount Bank, benefit from access to the

Palestinian monetary market as a captured

market. The report includes six chapters; each

details the activities of banks in one of the

examined fields of activity.

The first chapter focuses on mortgage loans

to individuals who wish to buy or build housing

units in West Bank settlements; the second

details the special loans for building projects

in settlements which banks offer. By providing

these two types of loans banks actively support

the transfer of the population of the occupying

The Israeli occupation is most often thought

of as motivated by ideological and political

impulses, but Israeli control over the Palestinian

and Syrian territories has significant economic

implications. There are many commercial

companies involved in Israeli control over the

occupied population, the exploitation of natural

resources from occupied territory and the

settlement of Jewish-Israeli citizens in occupied

land. While it may seem obvious to state that all

of this economic activity is dependent on support

by financial institutions in general, and banks

in particular, the aim of the current report is to

expose the nature and extent of these activities

on the part of banks that operate in Israel.

As an activist research project dedicated to

ending Israeli control of occupied land our

aim in this research was to learn about the

explicit participation of Israeli banks in providing

the financial framework for this continued

occupation. For this purpose we have searched

for publically available documents and relevant

publications. These documents include both

official registry records, as provided by Israeli

governmental agencies, and information that

the banks and the companies involved publish

themselves. We have also conducted interviews

with concerned parties. The following report

has used some of the documents collected

to highlight specific examples of economic

activities that serve to delineate patterns of

banking activity. Our research has exposed and

categorized the patterns of activities in which

Israeli banks provide the financial infrastructure

for all activities of companies, governmental

agencies and individuals that are economically

active in the occupation of Palestine and the

Syrian Golan Heights. It shows how the services

provided by the banks support and sustain

these activities. Additionally, this report shows

that the banks are well aware of the types and

whereabouts of the activity that is being carried

out with their financial assistance.

Introduction: The Israeli Banks

Financing the Israeli Occupation 2010

Who Profits from the Occupation 7

power to occupied land (a specific violation

of international law), and its sustainment.

Furthermore, real estate in Israeli settlements is

used in these instances by banks as collateral

for the loans. Thus, through these loans banks

become stakeholders in a settlement real estate

and, in cases of foreclosure, the bank may end

up fully owning that property.

In order to function, local and regional councils

and municipalities of settlements in the occupied

territories receive financial services from banks.

The third chapter is dedicated to this issue. These

services include the opening and managing of

bank accounts, the transfer of funds and the

provision of loans. Through these loans the local

governance of settlements can sustain itself,

develop and expand the existing settlements,

build facilities for the benefit of the settlers and

attract more Jewish-Israelis to these settlements.

In the forth chapter we specify the branches

which Israeli banks operate in settlements.

Through these branches the banks provide

financial services to settlers and to commercial

companies in settlements. The bank branches

are part of the service infrastructure that enables

the continued development of the settlements,

and they constitute the direct physical presence

of the property and personnel of the banks in the

settlements, ownership of property rights in the

settlement, as well as direct participation in the

settlement economy as municipal tax payers.

As explored in the fifth chapter, Israeli banks

also provide financial services to businesses in

the settlements and to businesses whose entire

commercial activity is occupation-related. For

instance, Israeli banks provide loans and offer

bank accounts to factories which are in the

industrial zones of settlements or whose main

area of activity is the construction of settlements

or infrastructure projects for the use of Israelis

in the occupied area. The property of these

businesses in the occupied area is, many times,

used as collateral for such loans.

In the sixth chapter we specify benefits that Israeli

banks gain from their access to the Palestinian

monetary market. Restricted by the agreements

which were signed between the Palestinians

and the Israelis as part of the Oslo Accords,

the Palestinian monetary market cannot have a

currency of its own. The Israeli shekel dominates

The branch of Bank Poalei Agudat Israel of First International Bank in the settlement of Modi’in Illit

Photo: Who Profits, April 2009.

Financing the Israeli Occupation 2010

Who Profits from the Occupation 8

Methodology

Research for this report was conducted using

both desk studies and field research. The desk

studies included the collection and analysis

of public information, published by the banks

themselves, by the Bank of Israel, by the

companies involved and on official records as

they are published by the Israeli government.

For instance, information concerning mortgage

loans is based on official records of the central

mortgage registry of the Israeli Ministry of

Finance. Similarly, details of loans given to

businesses that operate in settlements were

collected from the central Israeli registrar of

companies. Information from Mifal Hapais, the

Israel National Lottery, was retrieved using

questions submitted to Mifal Hapais according to

the freedom of information act.

Field research included the visiting of

construction sites in settlements, the collection

of information about construction companies

and about the activities of banks in settlements.

Information concerning accompaniment

agreements was collected from the construction

companies which are constructing the different

projects in the settlements and, when possible,

verified with the relevant banks. Much of the

data in the chapter concerning the involvement

of Israeli banks in the Palestinian monitory

system is based on interviews conducted with

Riyad Abu Shehadeh, Director of Inspection and

Supervision Department, Palestine Monetary

Authority (PMA). Additionally, we sent this report

prior to its publication to all of the mentioned

banks and asked for their response. Bank

Discount was the only one which provided a

response and it can be found in Appendix C.

most of the Palestinian monetary market because

of the subordination of the Palestinian economy to

that of Israel. Thus, Palestinian banks have to rely

on Israeli banks, which serve as correspondence

banks, for the transfer of funds and shekelclearing

services. To provide these services,

the Israeli banks which supply these services

to the Palestinian banks demand high cash

collaterals, of more than a billion shekels, which

are deposited, by the Palestinian banks, in the

Israeli banks. Additionally, the Israeli banks charge

high commissions for these services and impose

limitations on the transfer of money, both of which

increase the costs of such operations and the risks

involved for the Palestinian banks. Thus, Israeli

banks enjoy exclusive access to the Palestinian

monetary market as a captured market.

In each of the chapters, the report produces

some explicit and typical examples for each of

the six categories of activity specified herein.

These, in our eyes, clearly portray the scope

and extent to which banks in Israel are complicit

in occupation-related endeavors. Israeli banks

provide the financial basis for the construction

of settlements, for the maintenance of the

settlements and for Israeli commercial activity in

the occupied territory and reap financial benefits

from the subordination of the Palestinian financial

market as a captured market. Moreover, this

participation in highly controversial political

projects, which in some cases are explicitly

contrary to international law, is clear and

unambiguous to bank officials as well as to the

public. The findings of this research show that

as the providers of all of these services, and

as direct participants in this economy, Israeli

banks are beneficiaries and stakeholders in the

financial activity of illegal Israeli settlements in

the occupied territories and in Israeli control over

the Palestinian financial market.

Financing the Israeli Occupation 2010

Who Profits from the Occupation 9

1

Mortgages for

Homebuyers in

Occupied Territory

Financing the Israeli Occupation 2010

Who Profits from the Occupation 10

T

are outside of the main urban zones, the

Israeli government provides economic

incentives to people who live in what is defined

by the Israeli government as Priority Areas.

An individual living in a Priority Area is entitled

to tax deductions and subsidized mortgage

loans². There are two types of areas that are

defined as Priority Areas: one is of areas in the

periphery zones of the State of Israel (including

the Golan Heights) and the second is of Israeli

settlements in the West Bank. Since many of

the major settlements in the occupied West

Bank are relatively close to the large urban

centers inside Israel, mainly the Tel Aviv and

Jerusalem metropolises, defining them as

Priority Areas enables individuals to enjoy these

benefits while living at a comfortable distance

from these urban centers. Additionally, a military

decree forbids Palestinian residents of the West

Bank from entering the Israeli settlements, let

alone purchase houses in them, and different

administrative and bureaucratic mechanisms

are in place to prevent Palestinians who hold

Israeli citizenship from moving into settlements in

occupied land. Thus, these benefits form a type of

structural discrimination that operates according

to racial segregation which privileges only Jewish

Israelis.

There are six Israeli banks that offer mortgage

loans for homebuyers, and these make up all

of the major Israeli commercial banks: Bank

Hapoalim, Leumi Mortgage Bank (of Bank Leumi),

o encourage Israelis to settle in areas that

1

Mortgages for Homebuyers in Occupied Territory

² See here for a full list of areas which qualify as priority areas: www.moital.gov.il/cmstamat/ishuvim.aspx?sValue=%E0 (in

Hebrew). See here for a specification of the criteria according to which individual homebuyers can receive subsidies when

applying for mortgage loans: www.moch.gov.il/Moch/HousingSupport/AshafHasiua.htm (in Hebrew).

A sign advertising the construction of a new neighborhood in the settlement of Barkan (64 housing units).

The logo of Mizrahi Tefahot Bank appears on the top left corner of the sign and at the very bottom of the

sign it says: “Mizrahi Tefahot Bank, Mortgages available from the experts of Tefahot, home-buyers here get

preferential conditions and service.”

Photo: Peace Now, June 2009

Financing the Israeli Occupation 2010

Who Profits from the Occupation 11

1

Mortgages for Homebuyers in Occupied Territory

Mizrahi Tefahot Bank, Discount Mortgage Bank

(of Israel Discount Bank), The First International

Bank of Israel (FIBI) and Jerusalem Bank. All of

these banks provide mortgages for individuals

wishing to build or purchase homes in Israeli

settlements in the occupied territory, including the

West Bank, the Golan Heights and the settlement

neighborhoods of East Jerusalem. By providing

these loans to homebuyers in settlements, the

Israeli banks take part in the structural racial

discrimination as described above.

By providing these mortgage loans for the

construction or the purchasing of homes in

settlements, the banks turn themselves into active

participants in the development and sustainment

of the Israeli settlements in the occupied territory.

Furthermore, as is most often the case with

mortgage loans provided for the purchasing of

property, the property is used as collateral for the

loan. When accepting property in a settlement as

collateral for the mortgage loans the banks have

a stake in these properties, and in cases when

the homebuyers fail to pay back the mortgages,

the banks also find themselves as the owners of

these properties. Thus, through providing these

mortgage loans the banks also become owners of

property in these settlements.

The branch of Bank Leumi in the settlement neighborhood of Pisgat Ze’ev in East Jerusalem.

Photo: Who Profits, April 2009

A record of a mortgage given to a homebuyer in the

settlement of Ariel by Discount Bank in 2010.

Source: Israeli mortgage registrar

Financing the Israeli Occupation 2010

Who Profits from the Occupation 12

2

Providing the

Financial Basis for

Building projects in

Settlements

Financing the Israeli Occupation 2010

Who Profits from the Occupation 13

T

is highly dependent on special loans

which finance construction projects from

the early stages until completion. These loans

are provided under special terms known as

“accompaniment agreements” (Heskem Livui).

The agreements are regulated by the Sale of

Apartments Law (Assurance of Investments

for Apartment Buyers)³ and by management

regulations of the Bank of Israel. These loans

are also supervised by the Israeli Ministry of

Construction and Housing.

Our research has exposed that Israeli banks

provide such loans for construction companies for

the purpose of constructing housing projects in

settlements in occupied territory.

Accompaniment agreements are an integral part

of development plans and many of the major

projects in Israel and the occupied territories would

have difficulty reaching completion without the

financial backing of the accompanying banks. In

these agreements, the accompanying bank holds

the real estate property as collateral until all of the

housing units in the project are sold to buyers. The

accompaniment agreement ensures that the bank

provides the construction company with all of the

main financial services until the completion of the

project. This includes credit for the company to

build the project and financial guarantees on the

housing projects for the apartment buyers.

Prior to an accompaniment agreement, the

bank appoints a special officer to examine the

profitability of the project. After entering the

agreement, an officer of the bank monitors the

development of the construction and supervises

the project. Usually the bank is also involved in

determining the price rates of the apartments and

the schedule for the completion of the construction.

In addition, the payments of homebuyers are

deposited in a dedicated bank account in the

accompanying bank, designated exclusively for

this purpose. This account is controlled by the

accompanying bank and the entire cash flow of the

project is managed through it. Thus, the signing of

an accompaniment agreement deeply implicates

the bank in the construction project; in a sense,

the bank has taken on itself a form of partnership

with the construction company for the purpose of

completing the particular construction project. In

case the project goes bankrupt, the bank becomes

the owner of the property, responsible to the

apartment buyers.

In 2008, the Sale of Apartments Law was

amended and oversight over accompaniment

agreements was tightened. The amendment

was legislated following the exposure of a fraud

case known as the Heftziba Affair. One of the

largest construction companies in Israel, Heftziba,

which specialized in developing low-cost housing

projects, went bankrupt. The company was

involved in the construction of many residential

buildings in West Bank settlements. Consequently,

the owner of the company, Boaz Yona, was

convicted of fraud and of stealing millions of dollars

from his clients without providing them the apartments

purchased by them. Following the Heftziba affair, the

Sale of Apartments Law was amended to include

the appointment of a commissioner in the Ministry of

Construction and Housing for the registration of the

accompaniment agreements.

he Israeli housing construction market

2

Providing the Financial Basis for Building Projects in Settlements

An advertisement for a construction project called

Yair Heights in the settlement of Ma’ale Adumim.

In the bottom it says: “Bank accompaniment and

mortgages: Bank Tefahot”.

Photo: Dror Etkes, December 2004

³ Sale of Apartments Law (Assurance of Investments for Apartment Buyers), see: www.nevo.co.il/Law_word/law01/240_006.doc

Financing the Israeli Occupation 2010

Who Profits from the Occupation 14

Generally, information about the involvement of

specific banks in accompaniment agreements

remains inaccessible to the public. Technically,

the law requires the Commissioner to manage a

registry of all new accompaniment agreements,

including the name of the accompanying bank.

The law also obligates the Commissioner to

submit an annual report about his activities to

the Knesset Finance Committee. But, in practice,

accompaniment agreements are usually privileged

information kept between the bank and the

construction company and are not available to the

public. The only report so far was submitted last

year, and it lacks information about the identity

of the accompanying banks. We appealed to

the Ministry of Construction under the Freedom

of Information Act and asked them to reveal

the names of banks that are accompanying

construction projects in settlements. In reply

they stated that the Ministry does not have this

information. Consequently, we collected this

information from the construction companies and

from the banks.

As with all other construction projects, the banks

that accompany the construction of settlement

housing projects finance the project, hold the

real estate property of the projects as collateral,

and offer financial guarantees to the purchasers

of residential properties. The Israeli settlements

in the occupied territories constitute a breach of

international law. The construction of housing

projects in these settlements is the foundation

of the settlement enterprise. Hence, prima facie,

through the accompaniment agreements and

the consequent involvement of the banks in the

construction of housing projects in settlements,

the banks are accomplices in the violation of

international law.

Our research has found evidence of

accompaniment agreements of six Israeli banks for

the building of projects in settlements in occupied

territory. The banks are:

Bank Hapoalim, Mizrahi

Tefahot Bank, Bank Leumi, Israel Discount

Bank, Jerusalem Bank, and the Union Bank of

Israel (Bank Igud).

An example of these banks’ deep involvement in

a construction project is found in the annual report

of Hadar Group. Hadar Group owns construction

and real estate companies. It builds a largescale

residential project in the Ma’aleh Adumim

settlement through its two fully owned subsidiaries:

Mitzpor Adumim, which is the developer of

the project, and Kir-Had, which serves as the

construction contractor. According to the plan, the

project will include 205 residential units upon its

completion. Hadar Group is currently the major

builder in Ma’aleh Adumim.

Bank Leumi

NIS (about 5.54 million USD) to execute the

construction of 32 housing units, and an additional

18.5 million NIS (about 4.88 million USD) for

other purposes in the project. In return, the bank

holds as collateral the land rights, the construction

project, the rights to the apartment buyers and

any rights the company has for VAT deductions.

In addition, as a condition for extending the credit,

the bank sets a timetable for the sale rate of the

apartments, in which the company has to sell at

least eight housing units in the early stages of the

construction.

extended a credit of 21 million

Bank Leumi

accompaniment agreement for another housing

project in Ma’aleh Adumim (called Hadar 3), under

similar terms, but because the foundation of the

project has not been laid, the construction fell

under the category of “Settlement Construction

Freeze”, and “therefore it is not known whether

and when this financing agreement will enter into

effect,” according to the report of Hadar’s board of

directors.

has agreed to sign an

Bank Igud

agreement for the construction of 44 housing units.

The agreement includes a credit of 8.8 million

NIS (about 2.32 million USD) for the purpose of

buying the property. In addition, the bank agreed

to extend a credit of about 17 millions NIS (about

4.48 million USD) for the construction and/or issue

guarantees for the home buyers. The collateral

held by the bank includes the construction rights

and the whole project, including the equipment

and stock of building materials. According to the

estimate of Hadar Group, the revenue of these 44

housing units will be about 44 million NIS (about

11.6 million USD), and the profit will be about 8

has signed an accompaniment

2

Providing the Financial Basis for Building Projects in Settlements

Financing the Israeli Occupation 2010

Who Profits from the Occupation 15

million NIS (about 2.11 million USD).

The following are a few examples of recent

accompaniment agreements between other major

Israeli banks and construction companies:

• Bank Discount

agreement with B. Yair Building Corporation,

a construction company, for the construction

of a project of 55 housing in Har Homa, a

settlement neighborhood of Jerusalem.

signed an accompaniment

•

agreement with Avisror Moshe and Sons, a

construction company of residential projects,

for the construction of about 55 apartments and

single-family houses in Har Homa. According

to the construction company’s timetable, the

construction will be completed in 2011.

Bank Hapoalim signed an accompaniment

•

are accompanying the construction of two

housing projects in the West Bank settlement

of Ma’aleh Adumim, which are called Highland

(44 housing units) and Highpark (32 housing

units). The developer of the project is the

Hadar Group, and according to its estimate,

the project will be completed in 2011-2012.

Bank Leumi and the Union Bank of Israel

•

The Mizrahi Tefahot Bank has an

accompaniment agreement with Kotler-Adika,

a development and construction company,

in which the bank has accompanied the

construction of a luxurious housing project,

named “Villa Style”, in the settlement of

Ma’aleh Adumim. The project includes 52

housing units.

•

accompaniment agreement with Eli Yohanan

Engineers, for the construction of a housing

project in the West Bank settlement of Beitar

Illit. The project is estimated to be completed

in 2011-2012.

Bank of Jerusalem signed an

2

Providing the Financial Basis for Building Projects in Settlements

An advertisement for a construction project called Zufin View in the settlement of Zufin. In the bottom it says:

“Mortgages in preferential conditions by Leumi Mortgage Bank”.

Photo: Who Profits, July 2009

Financing the Israeli Occupation 2010

Who Profits from the Occupation 16

3

Providing Financial

Services to Local

Authorities of

Settlements

Financing the Israeli Occupation 2010

Who Profits from the Occupation 17

L

municipalities of Israeli settlements in the

West Bank and the Golan Heights are

financial entities like all other local governing

authorities. The councils manage a budget,

and this budget enables the settlements to pay

salaries to the employees of the council, to fund

the services the council provides to its residents

and to construct facilities and infrastructure for

the benefit of their settlers. Consequently, the

councils of Israeli settlements in the West Bank

are reliant on the financial services provided for

them by banks.

Banks provide a wide variety of services to

local councils of settlements that are essential

for their sustainment. These financial services

include the opening and running of bank

accounts, the transfer of funds from the

government and from different sources and the

provision of credits by the banks to the councils.

However, our research focused on finding loans

that commercial banks provided to the councils

of settlements. In providing these loans the

banks do not only aid in the development and

sustenance of the settlements, but also form a

continual financial engagement with them. The

provision of these loans makes the banks into

investors in the continued development and

prosperity of the settlements.

Our research found that all of the major

commercial Israeli banks provided loans to

councils and municipalities of Israeli settlements

in the West Bank and the Golan Heights. For

instance, Bank Hapoalim provided mortgage

loans to the local council of the settlement of

Giv’at Ze’ev in 2010 and to the regional council

of Megilot in 2009. Similarly, Bank Leumi

provided a mortgage loan to the municipality

of Ma’aleh Adumim in 2009 and to the regional

council of Har Hebron in 2008. Discount

Bank also provided a mortgage loan to the

municipality of Ma’aleh Adumim in 2009, and its

subsidiary, Mercantile Discount Bank provided

a loan to the local council of Givat Ze’ev in

2010. Mizrahi Tefahot Bank provided in 2010 a

loan to the local council of Karnei Shomron and

to the regional council of the Golan Heights.

Bank Otsar HaHayal, a subsidiary of the First

International Bank of Israel, provided loans to

the local councils of Emanuel and Kdumim in

2010.

These are but only a few examples of such loans

given to Israeli councils and municipalities in

occupied territory. Most often, the future incomes

from taxes and other sources of revenues of

the councils are provided as collateral for these

loans. Together these loans amount to hundreds

of millions of dollars provided to the settlements

by the banks. The banks provide these loans for

periods ranging from a few years to long-term

loans of up to 99 years.

ocal and regional councils and

3

Providing Financial Services to Local Authorities of Settlements

A record of a mortgage loan given to the local

council of the settlement of Emanuel by Bank

Otsar HaHayal in January 2010.

Source: Israeli mortgage registrar

Financing the Israeli Occupation 2010

Who Profits from the Occupation 18

3

Providing Financial Services to Local Authorities of Settlements

Special Focus: Dexia Israel

In 2001 the Israeli

government privatized

what was until then

a government-owned bank called the Local

Treasury Bank (Bank Otzar Hashilton

Hamekomi). This bank specialized in

providing financial services to local authorities.

Consequently, the Dexia Group, a Belgian-French

financial institution with an emphasis on public

finance, purchased the Israeli Local Treasury

Bank and established Dexia Israel. Dexia Israel

is a public company, traded on the Tel Aviv Stock

Exchange, and the Dexia Group is its controlling

shareholder, holding 65% of its shares.

In 2007 the head of the council of the Ma’ale

Efraim settlement complained to the Israeli

Ministry of Finance that its requests for loans

from Dexia Israel were not approved and that

this was because the bank has stopped giving

loans to Israeli settlements beyond the Green

Line. The CEO of the bank, David Kapach,

was then summoned to the Finance Committee

of the Kneset (the Israeli parliament) and

was confronted with these allegations. Mr.

Kapach denied these allegations and provided

as evidence a list of municipalities and local

councils of settlements that have received long

term loans from the bank. He was also asked

whether the bank had any policy discriminating

against settlements and he replied “Absolutely

not”. The statements of the CEO in this meeting,

as they were published in the minutes, were the

first evidence that we found that the bank was

giving loans to settlements.

Based on this evidence the Belgium activists

group Intal initiated a campaign calling on the

Dexia Group to stop financing the settlements

through their Israeli subsidiary. Following months

of protest the company announced in June 2009

that it has not given any new loans to settlements

since June 2008 (not including Jerusalem):

Since the acquisition of Otszar Hashilton

Hamekomi by Dexia, the outstanding amount of

loans to settlements has today been decreased

to less than 1% of the total amount (0.82% on 31

December 2008 of some € 7.1 million) against

5% at the acquisition of the bank. In fact, no new

loans have been granted to the colonies since

June 2008. 􀂃

Confronted with this declaration, Dexia Israel

has denied that there was any change in their

policies towards Israeli settlements. When

approached directly by us in December of

2009, the Dexia Israel bank gave the following

statement: “Dexia Israel Bank gives services

to local municipalities in Israel and there is no

A record of a mortgage loan given to the local

council of the settlement of Har Hebron by Dexia

Israel in January 2009. The loans is for the sum of

300,000 NIS (83,000 USD) for a period of 20 years.

Source: Israeli mortgage registrar

4

Quoted from the statement of the Dexia Group as sent by email on September 24, 2009.

Financing the Israeli Occupation 2010

Who Profits from the Occupation 19

3

Providing Financial Services to Local Authorities of Settlements

decision to discriminate [against them] according

to geographic location; additionally, the option

of stopping the provision of services to any

of them is not being considered”. The bank’s

spokeswoman made sure we understood that

this reference to “local authorities in Israel”

included Israeli settlements in Jerusalem, the

West Bank and the Golan Heights.

5

Indeed, our research has revealed that seventeen

new loans were given by Dexia Israel to local and

regional councils of settlements in the second

half of 2008 and during 2009. For instance, in

August of 2008 Dexia Israel has given a loan to

the local council of the settlement of Kedumim of

1.1 million shekels (approx. 300,000 USD) and

another, for almost 400,000 shekels (approx.

109,000 USD) in January of 2009; the settlement

regional council of Mate Benyamin received a sum

of 5 million shekels (1.37 million USD) in three

loans in June 2008, November 2008 and April

2009. The regional council of the Golan Heights

received over 7 million shekels (approx. 1.9 USD)

in three loans between October 2008 and January

2009. Altogether, contrary to the Dexia Group

announcement of June 2009, Dexia Israel has

provided more than 23 million shekels (almost 6.5

million USD) in loans to settlements between June

2008 and the end of 2009. During this period the

municipality of Jerusalem received an additional

105 million shekels (approx. 28 million USD).

Moreover, the bank never announced it

would stop providing other financial services

to the settlements. For instance, the bank

provides services for transferring funds for

the construction and development of the

settlements. The national lottery company “Mif’al

Hapais” supports local councils by financing

the construction of educational facilities and

community and sports centers. According to

information received from Mif’al Hapais, most

often the funds for such projects are transferred

to the contractors through subsidiary accounts

which the local municipalities of settlements

open for them in Dexia Israel.

Dexia response: from June 2, 2010:

[The loans] deal with funding which was decided

and agreed upon by the Israeli government and

which is allocated in the budget of the Israeli

state. Dexia Israel has acted in accordance with

a contract with the Israeli state that was signed in

1985 and amended in 1998, according to which

resources of the government are made available

based on instructions by the government.

In this case Dexia has to act in the framework

of this services agreement based on these

instructions. Credit [to the councils] is accorded

using the resources of the Israeli state. The

Israeli state decides upon the conditions of the

loans, the amounts and its beneficiaries. The

The minutes of decisions made by the Shomron

regional council in the West Bank. Items 5a and

5b (highlighted) relate to decisions concerning the

opening of accounts in Dexia Israel.

Source: The website of the regional council of

Shomron

5

Quoted from the statement of the Dexia Israel as sent by email on December 30, 2009

Financing the Israeli Occupation 2010

Who Profits from the Occupation 20

3

Providing Financial Services to Local Authorities of Settlements

credits are not put on the balance and are

not from the balance of Dexia Israel. Dexia

Israel is not responsible in any way for the

agreements of this financing; this financing

is the complete responsibility of the Israeli

government. Moreover, Dexia Israel does

not receive any fees or revenues for this

type of transactions whatsoever.

Mifal Hapais has opened accounts with

Dexia Israel, as did all clients of Mifal

Hapais. If Mifal Hapais decides to give

subsidies in accordance with its own

working principles, it does this usually

through a transfer between accounts. In

that type of transfer no resources of Dexia

Israel are involved and Dexia has no

decision power.

However, in page 132 of the annual report

for 2009 of Dexia Israel the company states:

On the 3rd of Dec 1998 an agreement was

signed between the bank and the Accountant

General in the Ministry of Finance, that regulates

the transference of funds of councils and

the providing of budgetary loans under the

responsibility of the state through the bank. The

agreement was for a period of 10 years starting

Jan 1 1999 and ending 31 December 2008. On

the 23 of September 2008 the Ministry of the

Interior notified the councils that as of November

10 2008 the funds that are paid to the councils

will be transferred directly to the account of

each council and that each council will be able

to choose to receive the funds to an account in

any of the commercial banks or to its account

in Dexia Bank. Most of the councils announce

to the government and to the bank that they

have chosen to continue receiving their grants

through their Dexia accounts. These details are

subject to changes but it was not made clear by

the government as for the manner and timing of

these changes.

Financing the Israeli Occupation 2010

Who Profits from the Occupation 21

4

Branches of Banks

on Occupied Land

Financing the Israeli Occupation 2010

Who Profits from the Occupation 22

4

Branches of Banks on Occupied Land

T

basis but their continued existence is

enabled and sustained by a network

of services and support. The main services

include municipality services, infrastructure

services (electricity, water and communication),

health services by local clinics and medical

centers, transportation services, educational

services, etc. Israeli banks supply essential

financial services to individual residents of the

settlements as private customers as well as to

settlement businesses; for this purpose, Israeli

banks have branches in the settlements of

the West Bank and the Golan Heights. These

branches constitute direct physical presence

of property and personnel of the banks in the

settlements, ownership of property rights in

settlements, as well as direct participation in the

settlement economy as municipal tax payers.

In addition to being part and parcel of the

settlements themselves, the mere operation of

branches in the West Bank entail a structural

discrimination: located inside settlements, to

which the entrance of West Bank Palestinians is

prohibited, they offer their services exclusively

for Israelis. The branches in the occupied East

Jerusalem and the Golan Heights strengthen

Israeli presence in occupied land.

All of the major commercial banks in Israel

have branches on occupied land, either their

own branches or branches of banks in which

they are the controlling shareholders. The Bank

of Israel publishes a frequently updated list of

branches on its website, detailing their affiliation

and location. In total, 34 Israeli branches are

located in settlements.

their customers all of the services that any of the

other branches of these banks offer, including

he settlements were built on ideological6 These branches offer

A branch of Mizrahi Tefahot Bank in the settlement of Karney Shomron.

Photo: Who Profits, September 2010

6

List of bank’s branches, Bank of Israel, last updated on 09/05/2010, www.bankisrael.gov.il/deptdata/pikuah/snifim/snifim.xls

Financing the Israeli Occupation 2010

Who Profits from the Occupation 23

4

Branches of Banks on Occupied Land

managing their personal and business bank

accounts, receiving loans and mortgages,

issuing credit cards and the like.

Bank Hapoalim has • seven branches in

the settlement neighborhoods of East

Jerusalem. Those branches are located in

Jewish neighborhoods, which were built

after the occupation of the area in 1967 in

order to create a “Jewish Continuity” around

the city of Jerusalem. The bank also has a

branch in the Golan Heights.

• Mizrahi Tefahot Bank has branches in the

West Bank settlements of Karnei Shormron,

Alon Shvut, Kedumim and in the settlement

neighborhood of Jerusalem, Ramat Eshkol.

Yahav Bank for Government Employees, for

which Mizrahi Tefahot holds 50% of its shares,

has a branch in occupied East Jerusalem.

• Two subsidiaries of the First International

Bank of Israel (FIBI) have branches in

West Bank settlements: Bank Poalei

Agudat Israel (PAGI) (68.7%) and Bank

Otsar HaHayal (68%). PAGI, which

mainly serves the Jewish ultra-orthodox

community, has two branches in Modi’in Illit

(in the neighborhoods of Kiryat Sefer and

Brechfeld) and one in Beitar Illit, both are

ultra-orthodox settlements in the West Bank.

The other subsidiary, Bank Otsar HaHayal,

has a branch in the settlement of Ariel.

• Bank Leumi has branches in the following

West Bank settlements: Ma’ale Edomim,

Oranit and Kiryat Arba. The bank also

has branches in Pisgat Ze’ev, Gilo and

Ramat Eshkol, which are all settlement

neighborhoods in East Jerusalem and

another branch in East Jerusalem.

Additionally, the bank as a branch in

Katzerin in the Golan Heights. Its subsidiary

(89.75%), Leumi Mortgage Bank, has a

branch in the settlement neighborhood of

Jerusalem, Ramat Eshkol.

• Israel Discount Bank has two branches

in the settlements of Ma’ale Edomim and

Ramat Eshkol. Mercantile Discount Bank, a

subsidiary of Israel Discount Bank (100%),

has a branch in the settlement of Beitar Illit

and another one in East Jerusalem.

• Jerusalem Bank has a branch in the

settlement of Modi’in Illit.

The branch of Bank Otzar HaHayal Israel of First

International Bank in the settlement of Ariel.

Photo: Esti Tsal, Who Profits, April 2009.

The branch of Jerusalem Bank in the settlement of

Modi’in Illit.

Photo: Peace Now, April 2009

Financing the Israeli Occupation 2010

Who Profits from the Occupation 24

5

Loans for

Businesses

Financing the Israeli Occupation 2010

Who Profits from the Occupation 25

5

Loans for Businesses

I

opportunities for Israeli and international companies. The activities of such businesses range

from settlement-related activities (the construction of housing projects and infrastructure of

settlements, producing in settlements, providing them with services), activities that relate to

Israeli exploitation of Palestinian labor, market and natural resources, and the construction and

operation of the Separation Wall and the checkpoints. As with any other business activity, these

business operations are dependent on financial services provided by banks.

Since this research aims to expose the involvement of commercial banks in the financing of

occupation-related business activities, we traced the funding to specific business activities whose

connection to the occupation is unmistakably evident. Presumably, in these cases, the financing

banks have clear knowledge that their services are used in the economy of the occupation. For

instance, we focused on companies that are located in settlements and whose entire business

activity is in the West Bank (see details below), and we checked which banks provide funds to

these companies. Additionally, we searched for business loans in which property in settlements

was used as collateral.

Our research shows that all of the Israeli commercial banks provide business loans for

companies that are directly and clearly involved in the occupation.

sraeli control over the occupied Palestinian and Syrian territories provides many business

Here are some examples of such companies:

Company name Description of

company activity

Loans the

company received

Abadi Bakery

A company manufacturing

savoury bagel cookies. The

head office of Abadi Bakery

and its main production facility

are located in the industrial

zone of Atarot, which is an

Israeli settlement in the West

Bank.

The company used the property

it rents in Atarot from Jerusalem

Economic as collateral for

several loans it has taken over

the years, including loans from

Mizrahi Tefahot Bank, from

Mercantile Discount Bank (a

subsidiary of Discount Bank)

and from Union Bank.

Top Greenhouses

A company that manufactures

greenhouses. The company

and its manufacturing facility are

located in the industrial zone of

Ariel West, which is an Israeli

settlement in the West Bank.

Over the last decade the

company received loans from

Discount Bank, Bank Leumi,

Bank Hapoalim and Mizrahi

Tefahot Bank.

Table Continues >

Financing the Israeli Occupation 2010

Who Profits from the Occupation 26

5

Loans for Businesses

Eastern Lines

Eastern Lines is a logistics

company that provides

transportation services of

agricultural products. The

main office of the company is

in the settlement of Thomer in

the occupied Jordan Valley.

The company transports fruits

and vegetables from farms in

settlements to the export ports

and storage houses inside Israel.

The company received loads

from Bank Otsar HaHayal (a

subsidiary of First International

Bank) and from Bank Leumi.

Tzifha International

Tzifha International is a

developer of construction

projects. It has developed

a commercial center and

several housing projects in the

neighborhoods of Brachfeld

Estate and Kiryat Sefer in

the Modi’in Illit settlement. In

addition, the company was

the project manager for the

construction of a school in

Modi’in Illit. It also operated a

quarry, which is now inactive, in

Modi’in Illit, through Kal Binyan.

The company mortgaged a

property it owns in the West

Bank settlement of Modi’in

Illit for a loan from Jerusalem

Bank.

CityPass

CityPass is a consortium of

several Israeli and European

companies including Alstom,

Veolia Environnement, Ashtrom

Group, Harel Insurance and

Polar Investments. The sole

activity of the consortium

is the construction of the

controversial light rail in

Jerusalem. The light rail

project is a transportation

project that will connect the

settlements and the settlement

neighborhoods around

Jerusalem with the city center.

The consortium receives

financing from Bank Leumi.

According to press publications

the project is also financed by

Bank Hapoalim.

Financing the Israeli Occupation 2010

Who Profits from the Occupation 27

6

The Israeli Banks

and the Palestinian

Banking Market

Financing the Israeli Occupation 2010

Who Profits from the Occupation 28

6

The Israeli Banks and the Palestinian Banking Market

A

between Israel and the Palestinian

Authority, there is no independent

Palestinian currency. Consequently, the

Palestinian market operates using four different

currencies: the Israeli shekel, US dollar, EU

euro and Jordanian dinar. While all of these

currencies are influenced by different external

factors, the extent that the shekel is used in

the Palestinian market is a derivative of the

subordination of the entire Palestinian economy

to that of Israel’s.

The market share of the shekel is determined by

several factors including the income from taxes,

mainly customs and VAT, that Israel collects

from the Palestinian Authority, which is one of its

central sources of income; the large percentage

of Palestinians that are employed by Israeli

employers in settlements and in Israel; and the

fact of Israel being the predominant import and

export market for the Palestinians.

balance illustrates the commercial imbalance

between Israel and Palestine: out of 20 billion

shekels in annual transfers, 80% (16 billion) are

transferred from Israel to the Palestinian market

and only 20% are transferred from Palestinian

ccording to the implemented agreements7 The trade

banks

that the shekel holds a substantial percentage of

the Palestinian market.

Despite the predominance of the shekel in

the Palestinian market, Palestinian banks do

not have direct access to the clearing house

of the shekel, and they have to buy clearing

services from Israeli banks. There are two

Israeli banks that provide clearance services

to the Palestinian banks: Bank Hapoalim and

Discount Bank. These services are provided

to the Palestinian banks in accordance with

agreements that each of the banks signed with

one of these Israeli banks. These agreements

pose several limitations and have severe

implications on the cost of the shekel for the

Palestinian banks.

According to these agreements, in order

to provide these services the Israeli banks

demand high cash collaterals, of over one

billion shekels (more than 212 million Euros),

which are deposited by the Palestinian banks

in the Israeli banks – deposits which do not

accumulate interest for the Palestinian banks.

Additionally, the Israeli banks charge high

commissions for these services and pose

limitations which increase the costs and the

risks for the Palestinian banks. For instance, the

Israeli banks limit the amount of money that can

be transferred between them and the Palestinian

banks in each transfer. Since the Israeli banks

charge commission for every transfer of funds,

this limitation increases the number of needed

transfer transactions and, consequently, the total

costs of fund conveyance are multiplied. In 2008

Palestinian banks paid 2.1 million shekels to the

Israeli banks and in 2009 they paid 2.5 million

shekels (445,000 Euros and 456,000 Euros

respectively). Additionally, these limitations

create conditions in which there is a constant

deficit for the Palestinian banks in the Israeli

banks, a fact that increases the cost of these

services for the Palestinians.

Moreover, only some of the Palestinian banks

are allowed to transfer shekels to the Israeli

banks; the newer banks are not included in

these agreements, severely limiting their ability

to operate. Thus, Israeli restrictions hinder the

ability of the Palestinian financial sector from

developing and disqualify the ability of many

of the Palestinian banks to provide adequate

services to their clients. This relationship also

means that monetary policy made by the Bank

of Israel applies in an undemocratic manner

in occupied Palestine, with the controvercial

policies such as inflation-targeting, purchase

of foreign currencies and an export-oriented

economic strategy imposed upon Palestinian

businesses and households, with no opportunity

for Palestinian entities to have inputs into

monetary governance.

8 to Israeli banks. Thus, it is estimated

7

Israeli Policy Towards the Palestinian Economy’, United Nations Conference on Trade and Development – UNCTAD, August

2009. See also: Dana Weiss, ‘Corporate Responsibility for Human Rights’, Tel Aviv University, 2010.

Khalidi, Raja J. and Taghdisi-Rad, Sahar, ‘The Economic Dimensions of Prolonged Occupation: Continuity and Change in

8

conducted on April 26, 2010 in PMA offices, Ramallah.

Interview with Riyad Abu Shehadeh, Director, Inspection and Supervision Department, Palestine Monetary Authority (PMA),

Financing the Israeli Occupation 2010

Who Profits from the Occupation 29

6

The Israeli Banks and the Palestinian Banking Market

The transfer of cash between the Israeli and

Palestinian banks, and even between different

Palestinian bank branches that are in different

enclaves within the West Bank, can only be

accomplished using Israeli armored cars. This

limitation, which is posed by the Israeli security

authorities, ensures that an Israeli company,

Brinks Israel, monopolizes almost all of the

cash transfer within the Palestinian occupied

territories and between Palestine and Israel.

The sign of Bank Discount in the settlement of Ma’ale Adumim

Photo: Who Profits, April 200

These restrictions and limitations only apply for

Palestinian banks and do not apply for any of the

other banks that operate within the Palestinian

financial market, such as the Jordanian and

Egyptian banks. Thus, these limitations create

disadvantaged conditions for the Palestinian

banks within their own market.

Financing the Israeli Occupation 2010

Who Profits from the Occupation 30

Conclusion

Financing the Israeli Occupation 2010

Who Profits from the Occupation 31

O

of the Israeli commercial banks take

part in many of the identified fields

of occupation-related activity, either directly

or through their subsidiaries. These banks

are active participants in the expansion of the

settlements by providing loans to homebuyers,

for the construction of housing projects in

settlements and to the local governance of the

settlements themselves. Additionally, they have

branches in settlements and finance commercial

activity and production in settlements. In

the provision of these services explicitly and

knowingly, the banks are active participants in

the colonization project of Israel in the occupied

West Bank and the Golan Heights. Through

these activities, the banks have erased the

Green Line (or 1967 borders) and have aided

in blurring the distinction between the State of

Israel and occupied land from a financial and

commercial points of view. It should be noted

that much of these activities are considered

illegal under international law. By providing the

financial framework for these activities the banks

are enabling these violations to be carried out.

It may seem obvious that like any and all

economic activity the activities that are related

to the settlements are dependent on the implicit

support of banks and financial institutions.

In order to operate, businesses need bank

accounts, need to transfer funds and are

dependent on receiving loans. The same is true

for individuals and governmental institutions.

However by taking property in the settlements

in the occupied territory as collateral, by

becoming partners in the construction of housing

projects in settlements, by providing financial

guarantees to businesses whose entire activity

is in settlements, this research has shown that

the extent and nature of the involvement of the

Israeli banks in these activities ranges beyond

their role as providers of basic services. Thus,

the research exposes them as active participants

in the different types of economic activities that

were investigated. These banks therefore bear

responsibility and need to be held accountable

for their role in the financing of economic activity

which sustains continued Israeli control over the

occupied territory.

As an organization which strives to end the

Israeli occupation, and to bring about a just and

lasting peace to all the inhabitants of the region,

we see these activities of the Israeli banks as

having a central role in the perpetuation of the

current unlawful and unjust conditions.

ur research has found that almost all

Financing the Israeli Occupation 2010

Who Profits from the Occupation 32

Appendixes

Financing the Israeli Occupation 2010

Who Profits from the Occupation 33

Bank Subsidiaries

9

Mortgages

Homebuyers

Loans to

Local Authorities

Loans for

Construction

Projects

Branches Loans for

Businesses

Palestinian

Banking

Market

Bank Hapoalim

x x x x 10 x x

Bank Leumi

x x x x

Leumi

Mortgage

Bank

(89.75%)

x x

Discount Bank

x x x x x

Mercantile

Discount

Bank

(100%)

x x x

Discount

Mortgage

Bank

(100%)

x

Mizrahi Tefahot

Bank

x x x x x

Yahav

Bank (50%)

x

11

First International

Bank of Israel

x

Bank Otsar

HaHayal

(68%)

x x x

Bank Poalei

Agudat

Israel

(68.7%)

x

Jerusalem Bank

x x x x

Union Bank

x x

Appendix A

: List of Activities of each of the Banks

9

Ownership percentage in parenthesis.

10

The bank has branches in the settlement neighborhoods of Jerusalem and in the Golan Heights.

11

The bank has a branch in East Jerusalem.

Financing the Israeli Occupation 2010

Who Profits from the Occupation 34

Appendix B

: The Banks: an Overview

Bank Leumi

Bank Leumi was founded in London in 1902 as the Anglo-Palestine Company by the Jewish

Colonial Trust Limited. Its shares were transferred to the State of Israel in 1983, as a result of the

banks stock crisis. Since 2005 it has been under a privatization process.

Major shareholders: 11.46% of the shares are held by the state of Israel, 9.59% are held by Shlomo

Eliyahu.

Key persons:

David Brodet, chairman

Galia Yahav, CEO

Traded in: Tel Aviv Stock Exchange

Symbol: LUMI

Market capitalization: 24,387,273,000 NIS (about 6,400 million USD)

International presence: The bank operates subsidiaries, branches and representative offices in

17 countries internationally, mainly in the UK, the USA, Switzerland, the Netherlands, France,

Germany, Luxembourg and Rumania.

Bank subsidiaries:

The bank's subsidiaries abroad include: BLL Corporation (USA, 100%), • Bank Leumi USA

(99.9%), Bank Leumi UK (99.8%), Bank Leumi Switzerland (84.1%), Bank Leumi Luxembourg

(100%), Bank Leumi Rumania (99.9%) and Leumi International Investments, whose bonds are

traded [or whose bonds were issued] in the London Stock Exchange. In addition, the bank has

agencies in New York, and branches in Panama and the Cayman Islands.

• Bank Leumi owns five banks in Israel: Leumi Mortgage Bank (100%), Arab Israel Bank (99.7%),

Leumi Leasing and Investments (99.5%), Leumi Finance (100%) and Leumi Real Holdings

(100%).

• The bank's main subsidiaries in the field of capital markets and financial services are Leumi

Card (80%), Leumi Partners (100%), Leumi Capital Market Services (100%) and Bank Leumi

Le'Israel Trust Co. (100%).

• Bank Leumi has partial control over non-banking companies as well, of which several are

involved in the occupation: Paz Oil Company (15.71%), Super Pharm (18%) and Partner

Communications (4.99%). In addition, it owns 18.14% of The Israel Corporation and 9.85% of

Migdal Insurance and Financial Holdings.

Address: 34 Yehuda Halevi St., Tel Aviv 65136

Tel: 972-3-5149419

Website: www.leumi.co.il

Financing the Israeli Occupation 2010

Who Profits from the Occupation 35

Bank Hapoalim

Traditionally, the bank was associated with the Histadrut (the general Israeli trade union). In 1983, as a result

of the banks stock crisis, it was nationalized. In 1997 the bank was privatized by the government and sold to

an investors group led by the late Ted Arison.

Bank major shareholders: Arison Holdings (20.24%), Israel Salt Industries (5.43%), Excellence Investments

(2.79%).

Key persons:

Shari Arison, holder of controlling interest in Arison Holdings

Yair Saroussi, chairman

Zion Kenan, CEO

Traded in: Tel Aviv Stock Exchange

Symbol: POLI

Market capitalization: 19,829,832,000 NIS (about 5,210 million USD)

International presence: the bank has wide international activity, mainly in the US, the UK, Switzerland and

Luxembourg.

Bank subsidiaries:

The bank's subsidiary, Isracard Group (98.2%), includes the following companies: • Isracard, Poalim

Express, Aminit, Europay (Eurocard) Israel, Isracard Mimun, Isracard Nechasim and Global Factoring.

The main activities of the group are financing, issuing and operating credit card systems. The group has

licensing agreements with Mastercard, Visa and is the exclusive issuer of American Express in Israel.

• Poalim Capital Markets - Investment House (100%) provides various services including financial and

strategic consulting for mergers and acquisitions in Israel and abroad, consulting for privatization

processes and for public and private offering abroad, and guidance of companies in Israel and abroad

in investments. Its equity-basis investee, Poalim I.B.I. Managing and Underwriting (19.97%), is a public

company traded in the Tel Aviv Stock Exchange and provides underwriting and management services.

• Poalim Sahar, a fully owned subsidiary, specializes in services for pension funds, bank provident funds,

study funds, insurance companies and public companies. The company provides brokerage services,

custody services, research and representation at general assemblies, and other related services in

Israel and abroad.

• Poalim Trust Services, a fully owned subsidiary, is active mainly in Israel and the US.

• Subsidiaries and Branches Abroad: Bank Pozitif in Turkey and Bank Pozitiv in Kazakhstan; 70% of

OJSC Ukrainian Innovation Bank and approximately 80% of the Russian JSC SDM Bank.

• Within its Global Private Banking (GPB) the bank has many subsidiaries abroad, mainly in Switzerland,

Luxembourg, the US and UK, as well as in the Cayman Islands and in Latin America.

• Poalim Asset Management companies, based in London and Ireland.

• Hapoalim Securities, registered and operating in the US.

Address: 63 Yehuda Halevi Street, Tel Aviv 65781

Tel: 972-3-5673697

Website: www.bankhapoalim.co.il

Financing the Israeli Occupation 2010

Who Profits from the Occupation 36

Mizrahi Tefahot Bank

The bank was traditionally associated with the religious-Zionist Mizrahi Movement. In 1983 it was

nationalized, along with other major banks, and privatized in 1995.

Bank major shareholders: 20.12% of the shares are owned by Moshe (Muzi) Wertheim, 25.61% are

owned by the Offer Group.

Key persons:

Yaakov Perri, chairman (former head of the Shin Bet)

Eli Younes, CEO

Traded in: Tel Aviv Stock Exchange

Symbol: MZTF

Market capitalization: 7,244,163,000 NIS (about 1,903 million USD)

International presence: the bank has activities mainly in Switzerland, the Netherlands, the UK and

the US.

Bank subsidiaries:

Mizrahi Tefahot Bank owns 50% of Yahav Bank for Government Employees • (together with the

Histadrut, the Israeli Federation of Labor, and the State of Israel).

• The bank fully owns several Israeli companies in the field of capital market, finance banking,

including: Etgar Investment Portfolio Management, Mizrahi Tefahot Underwriting and Issuance

(1980), Mizrahi Tefahot Issue Company, Mizrahi Tefahot Trust Company, Tefahot Insurance

Agency (1989). Other subsidiaries are: Mehish Computer Services (100%), Netzivim Properties

and Equipment (100%), Mizrahi Tefahot Security Services (100%) and Psagot Yerushalaim

(25%).

• The bank activities abroad is carried out through its fully owned subsidiaries – United Mizrahi

Overseas Holding Company (the Netherlands), United Mizrahi Bank (Switzerland) and UMTB

Securities (USA) – and through branches or representative offices in the UK, the US, Cayman

Islands, Germany, Mexico, Uruguay and Panama.

Address: 7 Jabotinsky St., Ramat Gan 52520

Tel: 972-3- 7559207

Website: www.mizrahi-tefahot.co.il

Financing the Israeli Occupation 2010

Who Profits from the Occupation 37

Israel Discount Bank

The bank was established in 1935 by the late Leon Recanati. In 1983, its ownership was transferred

to the State of Israel, like other banks, as a result of the banks stock crisis. It was privatized in 2006,

with the acquisition of its control core to an investors group led by Edgar Bronfman and his son,

Mathew Bronfman. The State is in the process of selling the remaining shares to private investors.

Bank major shareholders: 26% of the shares are held by the Bronfman-Schron Group, 20% are held

by the State of Israel.

Key persons:

Joseph Bachar, chairman

Giora Offer, CEO (until January 2011)

Traded in: Tel Aviv Stock Exchange

Symbol: DSCT

Market capitalization: 6,698,638,000 NIS (about 1,760 million USD)

International presence: The bank main overseas operations are carried out by the bank's

subsidiaries, branch and representative offices in the US, South America, Switzerland, the UK and

France.

Bank subsidiaries:

The bank holds three banks in Israel: Mercantile Bank (100%), Discount Mortgage • Bank (100%)

and the First International Bank of Israel (26.4%).

• Within its international activity, the bank fully owns four subsidiaries: Discount Bancorp, Israel

Discount Bank of New York, Discount Bank of Latin America and IDB (Swiss) Bank. The bank

operates a branch in London and representative offices in Paris, Santiago, and Buenos Aires.

• Israel Discount Bank's holdings in financial companies include: Israel Credit Cards (ICC)

(71.8%), Diners Club Israel (51%), Israel Discount Capital Market and Investments (100%),

Tachlit Investment House (100%), Discount Leasing (100%), Discount Manpikim (100%) and

Discount Trust (100%).

Address: 23 Yehuda Halevi St., Tel Aviv 65136

Tel: 972-3- 5145582

Website: www.discountbank.co.il

Financing the Israeli Occupation 2010

Who Profits from the Occupation 38

First International Bank Israel (FIBI)

54.33% of the shares of the bank are held by FIBI Holdings, whose controlling shareholders are

Bino family, Liberman family and Abeles family; 26.53% are held by Israel Discount Bank.

Key persons:

Jacques Elad, chairman

Smadar Barber-Tzadik, CEO

Traded in: Tel Aviv Stock Exchange

Symbol: FTIN1

Market capitalization: 6,653,676,000 NIS (about 1,748 million USD)

International presence: the bank has subsidiaries in the UK and Switzerland.

Bank subsidiaries:

The bank is the controlling shareholder of several other banks in Israel: • Bank Poalei Agudat

Israel (PAGI) (68.7%), Bank Otsar HaHayal (68%), U-Bank (100%) and Masad Bank (51%).

• Internationally, it fully owns FIBI Bank UK FIBI Bank Switzerland.

• The bank holds 28.2% of Israel Credit Cards (ICC. the company issues and markets credit cards

of Visa, Diners and Mastercard in Israel) and it fully owns Modus Selective – Management and

Investments Counseling, and 75% of The First International – Underwriting and Investments.

Address: 42 Rothschild Av., Tel Aviv 66883

Tel: 972-3- 5196223

Website: www.fibi.co.il

Jerusalem Bank

83% of the shares of the bank are held by Export Investment Co., which is controlled (73%) by Ms.

Kane Shoval. Another 9% of the shares of the company are held by Mr. Yitzhak Sela (directly and

through Export Investment Co.).

Key persons:

Yonatan Irroni, chairman

Uri Paz, CEO

Traded in: Tel Aviv Stock Exchange

Symbol: JBNK

Market capitalization: 470,847,000 NIS (about 123 million USD)

Bank subsidiaries: Jerusalem Capital Markets and The Bank of Jerusalem Trust Company.

Address: 2 Herbert Samuel St., Jerusalem 94632

Tel: 972-2-6706211

Website: www.bankjerusalem.co.il

Financing the Israeli Occupation 2010

Who Profits from the Occupation 39

Dexia Israel

The bank was founded as the Israeli Municipality Treasure Bank (Bank Otzar Hashilton Hamekomi).

It specialized in giving services to the local authorities in Israel. When the bank was privatized in

2001 it was bought by the Belgium-based Dexia Group. Dexia Israel is part of the Dexia Group,

which holds 65.3% of its shares.

Key persons:

Stephane Vermeire, chairman

David Kapah, CEO

Traded in: Tel Aviv Stock Exchange

Symbol: DXIL

Market capitalization: 392,526,000 NIS (about 103 million USD)

Bank subsidiaries: the bank fully owns Dexia Israel Issuances (formerly the Local Governance

Treasury) and Dexia Israel Financial Management.

Address: 19 Ha'arba'a St., Tel Aviv 64739

Tel: 972-3-7647600

Website: www.dexia-israel.co.il

Union Bank of Israel (Bank Igud)

24.78% of the shares of the bank are held by Yeshayahu Landau Holdings, 22.92% by Shlomo

Eliyahu Holdings, 15.16% by David Lubinski Assets, 7.7% by Sherodar Assets and 4.2% by Eliahu

Insurance Company.

Key persons:

Ze'ev Abeles, chairman

Haim Freilichman, CEO

Traded in: Tel Aviv Stock Exchange

Symbol: UNON

Market capitalization: 1,199,403,000 NIS (about 315 million USD)

Bank subsidiaries: Igud Investments, Igud Leasing, Igud Financial Markets and Investments, Igudim,

Igudim Insurance Agancy, Impact Igud Portfolio Management, Carmel Entrepreneurship, Carmel-

Igud, Lablub Insurance Agancies and Kokerman Investments.

Address: 6-8 Ahuzat Bayit St., Tel-Aviv 65163

Tel: 972-3-5191222

Website: www.bankigud.com

Financing the Israeli Occupation 2010

Who Profits from the Occupation 40

Bank Otsar HaHayal

Bank Otsar Hahayal ("Bank of the Soldier Treasury") is a subsidiary of the First International Bank (68%).

It was founded in 1946 to give services to the soldiers of the Jewish Brigade in the British Army. Today it

serves the regular army and workers of the Israel Aerospace Industries, as well as the general public.

Key persons:

Ze'ev Gutman, chairman

Israel Trau, CEO

Bank subsidiaries: Otsarit Trust Fund Co. and Otsar HaHayal Properties.

Address: 11 Menachem Begin St., Ramat Gan 52521

Tel: 972-3-6501204

Website: www.bankotsar.co.il

Bank Poalei Agudat Israel (PAGI)

PAGI is a full subsidiary of the First International Bank. The bank specializes in serving the Jewish

ultra-orthodox community in Israel.

Address: 9 Ehad Ha'am St., Tel Aviv 61290

Tel: 972-3-5196636

Website: www.pagi.co.il

Discount Mortgage Bank

The bank is a full subsidiary of Israel Discount Bank. The bank specializes in providing mortgages.

Key persons:

Etti Lengerman, CEO

Address: 16 Beit Hasho'eva St., Tel Aviv 61027

Tel: 972-3-5643111

Website: www.dmb.co.il

Leumi Mortgage Bank

The bank is a subsidiary of Bank Leumi (89.75%). The banks specializes in providing mortgages.

Key persons:

Avraham Zeldman, chairman

Yehoshua Burstein, CEO

Traded in: Tel Aviv Stock Exchange

Symbol: LUM.B152

Market capitalization: 10,874,000 NIS (about 2 million USD)

Bank subsidiaries: Ma'alot Insurance Agency.

Address: 37-31 Montefiore St., Tel Aviv 65201

Tel: 972-3- 5648400

Website: www.mashkanta.co.il

Financing the Israeli Occupation 2010

Who Profits from the Occupation 41

Appendix C

: Responses by the Banks

The response of Bank Discount:

Israel Discount Bank Coalition of Women for Peace “Financing the Israeli Occupation” - Your Report

dated August 2010

From: Barry Simon <barry.simon@discountbank.co.il>

Add

To: whoprofits@yahoo.com

Cc: Dorit Ben Simon <dorit.bensimon@discountbank.co.il>; ????? ??? ??????? <spokes@

discountbank.net>; yair ben zion <yair.benzion@discountbank.co.il>; ???? ???????? <sifat@dmb.co.il>

Dear Madam / Sir

In response to your letter dated 29th August, 2010, we hereby wish to provide clarification regarding

certain of the issues raised in your report. Although your letter was addressed to Discount Mortgage

Bank, our response is at a group level.

As a leading financal group in Israel with a nationwide franchise, Discount Bank provides a full

spectrum of financial products and services to our clients.

Our clients encompass ALL of Israeli society - Jewish, Arab (both Muslim and Christian), as well as

other minority groups residing in Israel. Discount Bank does not discriminate among these groups.

Among the 200 branches throughout the country, we have a branch in East Jerusalem, which by

the very nature of its location, provides banking services to BOTH the Arab and Israeli client base in

proximity to that branch.

Furthermore, within the Discount Bank Group, we have a wholly-owned subsidiary, Mercantile

Discount Bank whose retail focus is aimed specifically at targeting niche populations - The Arab-Israeli

sector and Orthodox Jewish sector - the branch system of this bank is therefore located appropriately,

where larger concentrations of their target markets reside, and, as would be expected, employs both

Arab and Israeli staff in its branches.

As to Discount Bank’s financing of real estate and construction projects and the granting of mortgages,

these are generally concentrated within a limited radius around the most densely populated area of

Israel - namely in and around the Tel-Aviv region of the country. Without having conducted an in-detail

study of each and every loan in our portfolio, and in accordance with our statement regarding the

geographic focus of our real-estate, construction and mortgage financing, it would be safe to say that if

there exist any projects in the areas mentioned by you, these would constitute only a small fraction of

our entire loan portfolio and would not be driven by any specific policy of the bank regarding the areas

of interest.

We trust that this clarifies the issues raised by you.

Sincerely,

Barry Simon

Head of Investor Relations

Israel Discount Bank

Financing the Israeli Occupation 2010

Who Profits from the Occupation 42

3 Yegia Kapayim St., Tel Aviv, Israel | P.O.Box 29214, Tel Aviv 61292, Israel

Tel: 972-3-5281005 | E-mail: whoprofits@yahoo.com