Jordan’s Banking Compliance Rules Take Center Stage as Draft Amendment Gains Attention
Amman, Jordan - The government of Jordan has drafted an amendment to the country’s 2000 Banking Law in an effort to strengthen banking regulations and prevent future financial crises. The proposed changes aim to enhance oversight and authority over bank management, ensuring the security of financial transactions.
Enhanced Authority for the Central Bank
The draft amendment grants the Central Bank greater discretion in determining the number of Board of Directors members and independent directors, as well as setting conditions for independence. These requirements are already outlined in the Corporate Governance Instructions for Banks No. 58 of 2014, which stipulate that an independent director must meet certain criteria, including:
- Not being an executive director or employee of the bank
- Not being related to any other board member or shareholder
The Central Bank will also have the authority to object to nominations to the Board of Directors if they do not meet these requirements. Additionally, the general manager of a bank cannot be related to the chairman of the Board of Directors, its members, or qualifying shareholders up to the third degree.
Financial Crisis Procedures
In the event of a financial crisis, the Central Bank will have the power to take various measures, including:
- Merging a troubled bank with another institution
- Selling its assets
- Establishing a “bridge bank” in coordination with the Jordan Deposit Insurance Corporation (JDIC)
The bridge bank will conduct banking activities under the supervision of the Central Bank until it is sold or merged. If the bridge bank’s assets are insufficient to cover its liabilities, the JDIC will cover the shortfall.
Enhanced Oversight
The draft amendment also empowers the Central Bank in other ways, including:
- Substituting a bank’s Board of Directors and ordinary general assembly during financial crisis procedures
- Assessing a bank’s assets, rights, liabilities, and obligations by a special committee formed by the Central Bank, which will include JDIC representatives
Objections to any decision or procedure by the Central Bank will not halt or postpone execution of these procedures.
A Step Forward
The proposed amendments aim to ensure transparency in banking management and provide a framework for aiding banks that encounter financial problems. By expanding the Central Bank’s oversight of bank management, the government hopes to prevent future financial crises, increase consumer protection, and reduce financial crimes.
The draft amendment is currently under review, with the potential to significantly impact Jordan’s financial landscape if implemented.