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The IMF praises the resilience of the Jordanian banking sector

Amman Today

publish date 2023-04-20 16:15:13

The International Monetary Fund said that the financial sector in Jordan, which is dominated by banks, has withstood a number of large external shocks, as a result of the measures implemented by the authorities to enhance the resilience of the financial system and its supervision.

He added, in the report of the Financial Sector Assessment Program and the Assessment of the Stability of the Financial System, that the financial sector withstood the global financial crisis, the events of the Arab Spring, the war in Syria, refugee inflows, and the coronavirus pandemic.

The analysis of systemic risks within the framework of the Financial Sector Assessment Program showed 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 stagflation, thanks to the high levels of regulatory capital in the banking system as a whole and the strength of revenues.

The report added, “Although the risks of contagion between banks are limited, the risks of credit concentration are high, and the exposure of banks to sovereign debt is large,” explaining that “non-financial companies may witness a significant increase in the volume of debts exposed to risks if one of the opposite scenarios materializes. Banks have ample liquidity that enables them to manage the high pressures on liquidity.

The report emphasized that it is evident from the challenging environment of external risks the need to strengthen the financial stability framework, as the authorities have implemented a set of the most important elements of the Basel 3 agreement, and Standard 9 of the International Financial Reporting Standards, and the frameworks of banks affecting the local financial system, and have also developed the integrity framework. Finance.

The Financial Sector Assessment Program recommended that the banking supervision approach be more dependent on risks and more forward-looking, stressing that the supervisory methodologies used in assessing the risks of the second pillar should be developed so that the levels of required capital are more sensitive to risks.

The report added that the macro-prudential safety framework requires strengthening the decision-making system and improving strategies, and a number of data gaps should be filled to implement stress tests on a unified global basis, analyze systemic foreign currency liquidity, and conduct more detailed analyzes of vulnerabilities in the household and corporate sectors for guidance. In calibrating macroprudential safety tools according to the type of borrower.

He said, “The relationship between sovereign debt and banks must be further analyzed, and the necessary precautionary policies may be considered to enhance the system’s solidity in this regard. Supervision of risk-based measures to combat money laundering and terrorist financing should also be strengthened.”

The International Monetary Fund called for the need to continue working to strengthen the framework for settling troubled banks, through the formation of a joint committee of the bodies concerned with this matter.

The Executive Board of the International Monetary Fund concluded the Financial Sector Assessment Program in Jordan on March 17 without holding formal discussions, and the preparation of the Financial System Stability Assessment Report was completed on February 23, and 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 kingdom

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Jordan News

Source : اخبار الاردن

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