British banks urged to avoid financing Israeli settlements ahead of UK trade ban

British lawmakers urged banks and financial institutions Tuesday to avoid new financial commitments linked to Israel's E1 settlement project as the government prepares to ban trade with illegal settlements.

The lawmakers, members of the all-party Britain-Palestine group, made the call in a letter to financial institutions warning of potential legal, sanctions and reputational risks.

The letter follows Foreign Secretary Ed Miliband's announcement two weeks ago of plans for a complete ban on trade with illegal settlements, alongside new sanctions on those involved in their construction.

However, the secondary legislation needed to bring the measures into force could take six to nine months to pass through Parliament.

"Commitments made now may be difficult to unwind when restrictions commence; the allocation of costs will depend on the contracts and applicable law. We ask boards to consider this interim risk before agreeing new or increased commitments," the letter, seen by The Guardian, said.

The lawmakers also urged institutions to put potential exposure to the E1 project and other settlement-related activity on their boards' agendas and risk registers.

The E1 project involves plans for thousands of new homes in the occupied West Bank, with the Israeli government seeking bids for two tenders covering as many as 3,400 homes.

More than 1,300 of the homes are covered by a tender due to close on Oct. 25, two days before the Israeli elections.

Financing, insurance and guarantees are required before construction can begin.

The project has been delayed for years because of concerns over its impact on prospects for a two-state solution, which is backed by many Western and Gulf states.

Israel has occupied the West Bank, including East Jerusalem, since 1967. The international community considers Israeli settlements built on occupied land illegal under international law, a position rejected by Tel Aviv.

Around 750,000 Israeli occupiers live in 156 illegal settlements and 360 settlement outposts across the occupied West Bank, including East Jerusalem.

Palestinians have faced repeated attacks by occupiers aimed at forcing them from their land.