Palestine
Banking sector profile — Middle East & North Africa
Data as of September 2026 • TGB Intelligence Unit
Banking sector at a glance
Structure and performance
Thirteen banks operate in Palestine: seven locally incorporated banks and six branches of Jordanian and Egyptian banks. Combined assets reached US$30.1bn in July 2026 (preliminary PMA data), up from US$28.2bn at end-2025 and US$24.5bn at end-2024. Resident customer deposits were US$22.5bn and credit facilities US$13.1bn. The market is led by Bank of Palestine, which consolidates Arab Islamic Bank; at end-2025 the group held 41.7% of sector deposits and 35.4% of credit facilities.
The absence of a national currency defines the system. The shekel, Jordanian dinar and US dollar all circulate, and the PMA has no conventional monetary policy instrument. Shekel clearing depends on Israeli correspondent banks. Those relationships rely on indemnity letters from Israel's Finance Ministry, which in early 2026 were being renewed on a short-term basis. Restrictions on repatriating shekel cash have led to large accumulations: Bank of Palestine alone held the equivalent of US$2.9bn of shekel cash at end-2025, against US$1.5bn a year earlier. This raises storage, security and liquidity-management costs.
Funding is deposit-based and liquid, with loans equal to under 60% of deposits. Sovereign exposure is rising. Bank credit to the Palestinian Authority reached US$4.18bn in July 2026, up from US$2.79bn at end-2024, while private-sector credit, at US$9.2bn at end-2025, remained below its 2023 level. The Authority's fiscal position depends on clearance revenues collected by Israel, part of which have been withheld, and this has led to arrears on public salaries and to suppliers. Banks, including Palestine Islamic Bank, have extended fresh facilities to the Ministry of Finance to meet instalments falling due.
Asset quality and earnings have been hit by the Gaza war. Bank of Palestine returned to a net profit of US$57.0m in 2025, after a loss in 2024, and reported a capital adequacy ratio of 16.29%. Its auditors qualified the accounts for a second year because Gaza exposure provisions could not be verified. Quds Bank's profit fell to US$2.4m on higher Gaza-related provisions. Nominal GDP was US$17.2bn in 2025, below the 2023 level, and West Bank unemployment was 28.7%. Correspondent-banking continuity is the principal tail risk.
Structural trends
The shifts shaping banking in Palestine.
Balance-sheet growth: sector assets rose 15.0% in 2025 to US$28.2bn and reached US$30.1bn by July 2026, driven by deposit inflows.
Rising sovereign exposure: bank credit to the Palestinian Authority increased from US$2.79bn in December 2024 to US$4.18bn in July 2026.
Shekel cash accumulation: Bank of Palestine's net shekel cash holdings nearly doubled to the equivalent of US$2.9bn at end-2025 from US$1.5bn.
Private-sector credit is stagnant: it stood at US$9.23bn at end-2025, below the US$9.55bn recorded at end-2023.
Leading institutions
Largest banks in Palestine by total assets.
| # | Bank | Total assets (US$) | Type |
|---|---|---|---|
| 1 | Bank of Palestine | US$10.7bn | Commercial |
| 2 | Palestine Islamic Bank | US$1.8bn | Islamic |
| 3 | Quds Bank | US$1.7bn | Commercial |
Total assets, FY2025 audited, consolidated; locally incorporated banks with published FY2025 statements (Bank of Palestine consolidates Arab Islamic Bank)
Supervision and capital rules
The Palestine Monetary Authority licenses and supervises banks, specialised lending institutions, money changers, money-transfer operators and electronic payment companies. It sets capital adequacy, provisioning and stress-testing instructions based on Basel standards, and it holds banks' statutory cash reserves without paying interest. Deposits are covered by the Palestine Deposit Insurance Corporation, to which banks pay annual subscription fees. AML/CFT oversight is exercised through the Financial Follow-up Unit. The PMA runs national payment infrastructure, including the Buraq instant settlement system, the iBuraq instant payment service and electronic cheque clearing. The regulatory agenda is dominated by crisis management: provisioning for Gaza exposures, the shekel cash surplus, and continuity of correspondent relationships with Israeli banks that clear shekel payments.
What changed in 2026
- March 2026: Bank of Palestine's auditors issued a qualified opinion on its FY2025 accounts, for a second consecutive year, citing insufficient audit evidence on Gaza exposure provisions.
- March 2026: Israeli indemnity letters covering correspondent banks that serve Palestinian banks, renewed every two months, were due to expire on 26 March; Bank of Palestine disclosed contingency measures.
- May 2026: Total assets of banks operating in Palestine peaked at US$30.8bn (preliminary PMA data), before easing to US$30.1bn in July.
- July 2026: Bank credit to the Palestinian Authority reached US$4.18bn, up from US$3.31bn in December 2025, amid continued pressure on public finances.
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