Worried banks in Palestinian areas beef up security

Anticipating unrest, many banks have beefed up security with March salaries for 165,000 government employees already one month overdue. April wages should be paid early next week but officials in the Hamas-led government say they have no cash.

"We are worried because hungry people could do anything. Starvation knows no God," said one senior official from a Palestinian bank who declined to be identified.

Bank officials said they feared people would blame the banks for refusing to handle money that had been pledged or provided by mainly Muslim nations to the government.

Palestinian officials and Western diplomats say banks have so far been unwilling to transfer funds to the Palestinian Authority under threat of U.S. sanctions.

The United States regards Hamas, which took office on March 29, as a terrorist entity. The Islamic militant group is sworn to destroy Israel and has rebuffed international demands to recognise the Jewish state, disarm and accept peace deals.

Israel has frozen monthly tax transfers while many Western nations have cut direct aid to the new government.

Among safeguards adopted by some banks, ATM machines are sealed off with iron bars after 4 pm, making them inaccessible.

Palestinian police have distributed hot line numbers for some banks to call in an emergency, said bank officials who declined to be identified. Other banks have put on more guards while the Palestinian Authority has deployed additional police.

The financial crisis has forced many government workers, especially low-ranking ones, to borrow from relatives and friends. Some borrowed from banks before some of the institutions suspended credit.

Palestinian officials say the economy could collapse within months, sparking widespread violence. Government salaries indirectly support as many as one in four Palestinians.

"We took precautionary measures and deployed additional police forces, even some in plainclothes, near banks in case some lunatics are stupid," said a senior security official.

BANK LOSSES

Many government employees already had loans and mortgages from banks but have not made repayments since salaries became overdue. Bank regulators estimated the loans of government employees at 10 percent of $1.8 billion, the total sum of general credit facilities.

There are 22 local and regional banks operating in the Palestinian territories. They once competed fiercely in newspaper advertisements to attract customers.

Now, banks are worried about their own health.

"We can wait another three months but after that we won't be able to collect our outstanding debts and in that case the whole banking system will suffer a huge blow," said another bank official.

The government's monthly salary bill of $118 million was a key driver of the economy.

Without the wages, economic activity has begun to dry up in the occupied West Bank and the Gaza Strip.

Finance Minister Omar Abel-Razeq on Wednesday appealed to banks to handle the government's funds.

"We understand the sensitivities ... (But) we expect the banks to shoulder their responsibilities and to take some risks," Abdel-Razek said.

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