Smotrich has until October 31 to approve the extension of this financial correspondence, which is vital for preventing the collapse of the Palestinian banking system.

The signatories of the letter warned that halting the banking agreement would lead to less transparent financial flows, further damaging the funds necessary to stabilize the Palestinian economy.

The treasury chiefs urged for at least a one-year extension of the banking agreement, with Netanyahu having the option to bypass Smotrich if necessary during an upcoming cabinet meeting.

The potential failure to renew this agreement raises concerns about destabilizing the Palestinian Authority and creating a security crisis in the West Bank.

U.S. Treasury Secretary Janet Yellen, along with seven other Western finance ministers, has warned Israeli Prime Minister Benjamin Netanyahu that Smotrich's actions could lead to the collapse of the Palestinian economy.

The finance ministers emphasized that not extending the banking authorization could halt over $13 billion in trade and worsen the economic situation in the West Bank.

This trade heavily relies on the international financial system, underscoring the interconnectedness of the Israeli and Palestinian economies.

U.S. officials have cautioned that severing banking ties would push the West Bank towards a cash economy, potentially benefiting terrorist organizations and undermining the weakened Palestinian Authority.

They reminded Israel that suspending the authorization would not only halt bilateral trade but also negatively impact the Israeli economy and exacerbate the dire situation in the West Bank.

Israeli Finance Minister Bezalel Smotrich is facing a critical decision regarding the renewal of a banking agreement essential for transactions between Israeli and Palestinian banks, which is set to expire soon.

Yellen and her fellow economic leaders are appealing to Netanyahu to ensure that Smotrich extends the authorization, which is crucial for maintaining financial ties.

Smotrich has expressed concerns that Palestinian banks may serve as fronts for money laundering, which complicates the negotiations surrounding the banking agreement.