IMF published its staff report and selected issues report in the context of the 2017 Article IV consultation with Jordan. Directors welcomed ongoing reforms to preserve the resilience of financial sector. The notable reforms include gradual adoption of Basel III and the decision to complement it with an additional capital buffer. These steps, along with the high levels of capitalization of banks, will provide buffers to deal with a broad range of shocks.
The staff report reveals that the banking system remains well-capitalized, profitable, and robust to shocks. The capital adequacy ratio, at 19%, is well above the regulatory minimum of 12%. Banks enjoy healthy profitability and have built up provisions while non-performing loans have been gradually declining, partly reflecting write-offs and restructuring. Further progress is being made to strengthen the financial sector supervision. The Central Bank of Jordan (CBJ) issued Basel III regulations on capital requirements in November 2016. It is now finalizing the regulations on domestic systemically important banks and, as a first step toward issuing the regulations on liquidity, has conducted a quantitative impact study of liquidity coverage ratios. The CBJ is confident that the banks’ capital and liquidity buffers will allow them to smoothly meet the new requirements. The gradual move to Basel III, along with the authorities’ decision to complement it with a 1.5% capital buffer, will help bolster further the sector’s resilience. The transfer to the CBJ of the supervision of the insurance sector is now expected to be finalized in early 2018. Efforts to strengthen the AML/CFT framework are gradually shifting from improved regulations to more effective implementation. All in all, the staff encourages the authorities to consider an update to the 2008 Financial Sector Assessment Program (FSAP) within the next two years.
The selected issues report discusses several topics such as the macroeconomic impact of the Syrian refugee crisis and regional conflicts on Jordan; balance sheet analysis of the Jordanian economy to identify potential financial vulnerabilities; and potential reforms needed in the context of the strategy to accelerate financial inclusion in Jordan.
Keywords: Middle East, Jordan, Banking, Insurance, Basel III, FSAP, Article IV, IMF
Previous ArticleOSFI Revises the Capital Floor for Banks
BCBS amended the guidelines on sound management of risks related to money laundering and financing of terrorism (ML/FT).
US Agencies (Farm Credit Administration, FDIC, FED, FHFA, and OCC) finalized changes to the swap margin rule to facilitate implementation of prudent risk management strategies at banks and other entities with significant swap activities.
PRA published a letter that builds on the expectations set out in the supervisory statement (SS3/19) on enhancing banks' and insurers' approaches to managing the financial risks from climate change.
EBA finalized the guidelines on treatment of structural foreign-exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR).
FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition.
IAIS published the list of Internationally Active Insurance Groups (IAIGs) publicly disclosed by group-wide supervisors.
FED has temporarily revised the reporting form on consolidated financial statements for holding companies (FR Y-9C; OMB No. 7100-0128).
EC launched a consultation on the review of the key elements of Solvency II Directive, with the comment period ending on October 21, 2020.
ECB launched a consultation on the guide that sets out supervisory approach to consolidation projects in the banking sector.
IAIS published technical specifications, questionnaires, and templates for 2020 Insurance Capital Standard (ICS) and Aggregation Method data collections.