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Jordan’s Banking Regulations Compliance: Government Drafts Amendment to Enhance Oversight and Authority

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The Jordanian government has drafted an amendment to the country’s Banking Law No. 28 of 2000, aiming to strengthen oversight and authority over bank management, ensuring the security of financial transactions.

Key Changes in the Proposed Amendments

Appointments to Bank Management Boards

  • The Central Bank will have the discretion to determine the number of Board of Directors members.
  • Independent directors must meet certain conditions, including not having been an executive director or employee of the bank within the last three years (as outlined in Corporate Governance Instructions for Banks No. 58 of 2014).
  • The Central Bank may object to the nomination of any person if they do not meet these requirements or are under 25 years old, lack good reputation, or are a member of another bank’s management team.

Conflicts of Interest

  • The general manager of a bank cannot be related to the chairman of the Board of Directors, any of its members, or Qualifying Shareholders up to the third degree.
  • The Central Bank will also have authority to apply this condition to high-ranking positions within the bank and may object to appointments that do not meet these requirements.

Crisis Management Measures

In the event of a financial crisis affecting a bank:

  • The Central Bank can take various measures, including merging the bank with another, selling its assets, or establishing a bridge bank.
  • The Jordan Deposit Insurance Corporation (JDIC) will be involved in these procedures and will cover any discrepancies between the value of the bank’s assets and liabilities.

Additional Powers for the Central Bank

  • Substitute the bank’s Board of Directors
  • Conduct special committee assessments of the bank’s assets and liabilities

Expected Impact

Experts believe that these changes will help maintain transparency in the management of Jordanian banks, reduce the risk of financial crises, and increase consumer protection. If passed, the draft amendment is expected to have a positive impact on the country’s financial market.