Sue Pentel was one of two women held on suspicion of criminal damage after an incident on Saturday.
The 72-year-old Jewish grandmother is a high-profile campaigner against Israel’s military action in Gaza.
Her solicitor said she was arrested “whilst peacefully protesting against the ongoing genocide in Palestine at Barclays Bank”.
According to reports, the two women were arrested after stickers promoting a boycott of the bank were allegedly placed on an ATM.
There has been criticism of the bank’s financial ties with arms companies that sell weapons to Israel. Several other branches of Barclays across the UK have previously been targeted.
Videos circulating online show Ms Pentel being spoken to at length by PSNI officers. She tells officers: “Children are dying in Gaza” and is then led away to the back of a PSNI vehicle.
Both women were released on Saturday evening and reported to the Public Prosecution Service.
Pádraig O Muirigh, who represents Mrs Pentel said: “Our client has refused to remain silent whilst thousands of innocent children have been killed, and many more thousands are starving as food and medicine is refused entry into Palestine.
“She has committed no offence and should not be criminalised for exercising her right to peaceful protest against these ongoing atrocities.
“Our client will robustly contest any attempt to criminalise her if a decision is made to prosecute. We will also be advising her in relation to the lawfulness of her arrest today.”
The PSNI said: “Police received a report relating to a protest in the Castle Place area of Belfast city centre on Saturday morning, May 24.
“Officers attended and two people have been arrested on suspicion of criminal damage.
“The women – one aged in her 70s and the other in her 50s – are in custody, assisting with police enquiries at this time.”
The pair were taken to Musgrave PSNI station, where campaigners gathered to show their support.
The IPSC Belfast expressed shock at “the PSNI treatment of a lifelong anti-racist activist who was arrested for standing up to protect international human rights and law.”
The group said they support “the international calls for the boycott of companies which help to fund and arm Israel in its brutal campaign against the people of Palestine.”
Sinn Fein MLA Pat Sheehan criticised the arrests.
“It is disgraceful that Sue Pentel — an elderly Jewish woman who has consistently and bravely campaigned for an end to Israel’s genocide in Gaza — has been arrested by the PSNI,” he said.
“Highlighting the genocidal, inhumane slaughter of defenceless civilians — and those who enable it — is not a crime.”
Sue Pentel was one of two campaigners arrested on Saturday.
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Mr Sheehan added: “We will be raising our concerns directly with the PSNI.”
People Before Profit MLA Gerry Carroll said: “All over the world Israel’s legitimacy has utterly crumbled. And so the establishment is ramping up its repression to try and silence protestors.”
SDLP councillor Paul Doherty said he was “deeply concerned” by the arrests.
He said they happened during a peaceful protest.
“Barclays should rightfully be boycotted due to their financial ties with companies that supply weapons and military technology to Israel,” he added.
“I stand in full solidarity with these activists and call for them to be released without charge.”
Barclays Bank has been contacted for comment.