A report by Human Rights Watch released on Wednesday says no Israeli law requires the banks to provide such services for the settlements.
It says the banks have continued to do so regardless of their human rights obligations. The group is calling on the banks to extricate themselves from the settlements or face the risk of action from shareholders.
Israel captured the West Bank, along with the Gaza Strip and east Jerusalem, in the 1967 Mideast war. About 400 000 people now live in West Bank settlements, and about 200 000 Jewish Israelis live in east Jerusalem.
Most of the international community considers the settlements illegal and an obstacle to creating a Palestinian state.