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“International Monetary” confirms the solidity of the Jordanian financial sector

Amman Today

publish date 2023-04-20 17:44:40

The International Monetary Fund confirmed that the financial sector in Jordan, which is dominated by banks, has withstood a number of large external shocks such as (the global financial crisis, the Arab Spring, the war in Syria, refugee inflows, and the Covid-19 pandemic) since the sector assessment program was conducted. the previous financial system in 2008-2009, which is partly due to the measures implemented by the authorities to strengthen the resilience of the financial system and its supervision.

In the report of the Financial Sector Assessment Program and the Assessment of the Stability of the Financial System, the Fund indicated that the banking sector in Jordan is generally resilient, as banks are able to withstand the occurrence of a major shock as a result of a state of global inflationary stagnation, thanks to the high levels of regulatory capital in the banking system as a whole and the strength of revenues.

Despite the limited risks of contagion between banks, the risks of credit concentration are high, and the exposure of banks to sovereign debt is large. Non-financial companies could see a significant increase in the amount of debt at risk if one of the adverse scenarios materializes. However, banks are well liquid which enables them to manage the high liquidity pressures.

The challenging external risk environment demonstrates the need to strengthen the financial stability framework. The authorities have implemented a set of the most important elements of the Basel III agreement, IFRS 9, and frameworks for banks affecting the local financial system, and have also developed a financial integrity framework.

The Financial Sector Assessment Program recommended adopting a more risk-based and forward-looking banking supervision approach, calling for the development of the supervisory methodologies used in assessing the risks of the second pillar so that the required capital levels are more risk-sensitive.

The report also recommended, within the framework of macro-prudential safety, strengthening the decision-making system and improving strategies, filling a number of data gaps to implement stress tests on a unified global basis, analyzing systemic liquidity in foreign currency, and conducting more detailed analyzes of weaknesses in the household and corporate sectors for guidance in the future. Calibration of macroprudential safety tools according to the type of borrower.

He stressed the need to continue analyzing the relationship between sovereign debt and banks, and to consider developing the necessary precautionary policies to enhance the system’s solidity in this regard, and to strengthen supervision of risk-based measures to combat money laundering and terrorist financing, in addition to strengthening the framework for settling the situations of troubled banks through the formation of a joint committee of bodies. concerned with this matter.

The Executive Board of the International Monetary Fund concluded the financial sector assessment program in Jordan on March 17, 2023 without holding formal discussions, and the preparation of the financial system stability assessment report was completed on February 2023.

The report is based on the work of joint missions between the International Monetary Fund and the World Bank dispatched to Jordan within the framework of the Financial Sector Assessment Program during the months of June and October 2022.

The Financial Sector Assessment Program, established in 1999, provides a comprehensive and in-depth assessment of a country’s financial sector. It is relied upon to conduct Article IV consultations, and thus contributes to strengthening the oversight activities of the Fund. The program is conducted on a compulsory basis in the 47 countries with financial sectors affecting the system. Otherwise, the procedure of the program is at the request of the member countries. A summary of the main results of the program is included in the Financial System Stability Assessment document.

The Executive Council shall take its decisions in accordance with the procedures of expiration of the term when its members agree on the possibility of considering the submitted proposal without holding formal discussions for this purpose. Favorite

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Jordan News

Source : اخبار الاردن

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