Jordan’s Financial Institutions Face Regulatory Compliance Shake-Up

Enhancing Transparency and Stability in the Banking Sector

The Jordanian government has drafted an amendment to the Jordanian Banking Law No. 28 of 2000, aiming to increase transparency and stability in the country’s banking sector. The proposed changes grant the Central Bank greater oversight and authority over bank management, ensuring that banks are better equipped to manage their operations effectively.

Strengthening Governance

The key changes introduced by the draft law include:

• Stricter criteria for independent board members, such as:
  • Minimum three-year separation from executive director roles
  • No employment or family ties with bank executives
  • High-level banking expertise
• The Central Bank’s power to object to nominations that do not meet these criteria
• Ensuring that general managers are not related to key stakeholders

Enhanced Crisis Management

In the event of a financial crisis, the draft law allows the Central Bank to take corrective measures, including:

• Mergers
• Sales
• Establishment of a bridge bank
• Support from the Jordan Deposit Insurance Corporation

The amendments also empower the Central Bank to:

• Substitute the bank’s board of directors and general assembly
• Assess the bank’s assets and liabilities through a special committee
• Implement procedures without objection from stakeholders

Expert Predictions

Financial experts predict that the proposed changes will have a positive impact on the financial market, reducing the risk of future crises and increasing consumer confidence. The draft law is currently under review and has not yet been passed into legislation.

Overall, the amendments aim to enhance the stability and transparency of Jordan’s banking sector, ensuring that financial institutions are better equipped to manage their operations effectively and protect consumers’ interests.