A few weeks ago, the European Council on Foreign Relations, a prominent international think tank, released a paper recommending that European banks and the European banking system at large boycott the Israeli banks that operate in what it called the “occupied territories.” The release of that document set off a wave of angry protests in Israel. The EU tends to adopt the council’s recommendations, so Jerusalem saw it as a significant escalation in the campaign of boycotts and embargoes against Israel.

In response, the EU invested considerable effort into assuaging Israel’s fear. After the document was published, official sources in the EU reportedly said that they are not considering adopting the recommendations listed in the position paper. Sources in the EU’s offices in Israel reportedly said that they have it on authority from Brussels that the EU does not plan to take action against Israeli banks operating across the Green Line.

This statement did manage to calm things down, at least temporarily, especially in the Israeli media. On the other hand, Israeli banks are far from calm. Behind closed doors, they are planning for a possible “diplomatic and economic tsunami” that would turn them all into pariahs. In internal discussions within the banks, the possibility of a “credit marking” by the EU, meaning that each Israeli bank commercially active in the West Bank could be blacklisted by Europe, is considered an “economic mega-assault” that could lead to a complete shutdown of the Israeli economy.

As one senior Israeli banking official told Al-Monitor on condition of anonymity, “When they talk about marking merchandise produced in the settlements, we can still absorb the damage and get over it. We can lose a few markets here and there, but it is not a death blow. Moves like that pose no strategic threat to the Israeli economy. When they are talking about the credit marking of Israeli banks, it is a whole different matter. There isn’t a bank in Israel that is not involved in economic transactions across the Green Line, from mortgages to business loans. It would be very serious if all those banks got added to the EU’s blacklist. And the problem isn’t limited to economics, either. It’s a political issue, too. We’d have to ask the prime minister for a government safety net.”