Financial Crime World

Jordan: BSA Regulations Give Central Bank More Oversight Over Banking Sector

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Introduction

The Jordanian government has drafted an amendment to the country’s banking law, giving the Central Bank more authority over bank management and providing a framework for dealing with financial crises. The proposed changes aim to enhance transparency and stability in the banking sector.

Key Provisions

  • Board of Directors Appointments: The Central Bank will have greater discretion in appointing members to a bank’s Board of Directors, ensuring that they meet certain criteria such as independence, financial expertise, and good reputation.
  • Conflict of Interest Resolution: The regulator will be able to object to nominations if they do not meet these requirements or if the individual has a conflict of interest.

Dealing with Financial Crises

  • Mergers and Asset Sales: New procedures for dealing with banks in trouble, including mergers, asset sales, and the establishment of “bridge banks” to maintain financial stability.
  • Risk Reduction: Measures designed to reduce the cost of correcting financial problems and prevent the spread of risk to other institutions.

Central Bank Powers

  • Management Control: The Central Bank will have greater powers to take control of a bank’s management if deemed necessary.
  • Board Substitution: The regulator will be able to substitute the bank’s Board of Directors and general assembly in order to implement its decisions.

Special Committee

  • Asset Assessment: A special committee will assess the bank’s assets, rights, liabilities, and obligations before implementing any procedures.

Benefits

  • Increased Consumer Protection: The draft law aims to increase consumer protection and reduce the risk of financial crimes by giving the Central Bank greater oversight over the banking sector.
  • Financial Market Stability: The changes are expected to have a positive impact on the financial market and help maintain stability in Jordan’s economy.

Overall, these amendments aim to strengthen the regulatory framework in Jordan’s banking sector, enhancing transparency, stability, and consumer protection.