G7 finance leaders to call on Israel to maintain Palestinian bank links

G7 Finance Ministers and Central Bank Governors' Meeting in Italy

STRESA, Italy (Reuters) - G7 finance leaders will call on Israel to maintain correspondent banking links between Israeli and Palestinian banks to allow vital transactions, trade and services to continue, according to a draft joint statement seen by Reuters on Saturday.

The statement, to be released at the end of a Group of Seven finance ministers and central bank governors' meeting in northern Italy, also calls for Israel "to release withheld clearance revenues to the Palestinian Authority, in view of its urgent fiscal needs".

The statement echoes a warning on Thursday from U.S. Treasury Secretary Janet Yellen, who said the failure to renew a soon-to-expire banking waiver would cut off a critical lifeline for the Palestinian territories amid a devastating conflict in Gaza.

"We call on Israel to take the necessary measures to ensure that correspondent banking services between Israeli and Palestinian banks remain in place, so that vital financial transactions and critical trade and services continue," the draft statement said.

The G7 finance leaders also called for the removal or relaxation of other measures "that have negatively impacted commerce to avoid further exacerbating the economic situation in the West Bank."

(Reporting by David Lawder; Editing by Frances Kerry)