Instructions No. 13 of 2023 Regarding the Handling of Liquidity Shortage in the National Economy

سلطة النقد الفلسطينية
PALESTINE MONETARY AUTHORITY

Instructions No. (13) of 2023
Regarding the Handling of Liquidity Shortage in the National Economy

Based on the provisions of Law Decree No. (9) of 2010 regarding Banks, particularly Articles (40, 43, 72) thereof, and based on the provisions of Instructions No. (6) of 2023, and in accordance with the powers delegated to us, and in pursuit of the public interest, we have issued the following Instructions:

Article (1)
Objective and Scope of Application

1. These Instructions aim to regulate procedures for dealing with liquidity shortage in the economy and facilitate liquidity injection through a number of instruments.
2. The provisions of these Instructions apply to all banks licensed by the Palestine Monetary Authority to conduct banking business in Palestine.

Article (2)
Procedures for Dealing with Existing Loans and Financing

Given the difficult economic conditions resulting from the current crisis's repercussions, banks are required to comply with the following:

1. Dealing with installments of public sector employees, private sector employees, and workers that have matured but remain unpaid due to delayed salary disbursement, according to the following options:
   a. Opening a temporary current account (debit) for public sector employees to be used for settling matured installments, subject to the following:
   1. Suspension of collecting the contractual interest on matured installments.
   2. Suspension of collecting late payment interest on matured installments.
   3. Suspension of collecting any commissions or fees.
   4. Collecting a declining interest rate of up to 3%.
   5. The employee's temporary current debit account is settled or reduced by the amounts transferred from the Ministry of Finance according to the deduction ratios specified in these Instructions.
   b. Allowing private sector employees and workers to defer/settle the deduction of matured or upcoming installments over the coming months until the end of January 2024, to be processed according to the following options:
   1. Spreading them over 24 months from the date of the last deferred installment.
   2. Spreading them over the remaining loan tenure.
   3. Rolling over the deferred installments to the end of the loan tenure.
   4. Not collecting any additional commissions or interest on the rescheduling process, and ensuring the interest on the new loan does not exceed that of the current loan.
   c. Allowing the rescheduling or restructuring of employee debts according to the following treatments and options:
   1. Rescheduling the entire debt, matured installments, and revolving current debit account within a new loan.
   2. Allowing exceeding the specified periods for personal and real estate loans beyond those stipulated in these Instructions.
   3. Calculating interest on the new (rescheduled) loan equal to or lower than the interest on the current loan.
   4. Not collecting any additional commissions or interest on the rescheduling process.
   5. Allowing granting the customer a grace period for the new loan not exceeding 6 months.
   6. Allowing the rescheduling process without settling the down payment specified in these Instructions.
   7. Not increasing the debt value beyond what it was on the rescheduling date.
   8. Allowing converting the debt balance in the same currency as the salary.
   9. Allowing future debt restructuring upon the customer's request to reduce the tenure without any commissions.
2. Complying with documenting amendments to financing agreements in accordance with the law and sound banking practices.

Article (3)
Procedures for Dealing with Existing Financing in Islamic Banks

1. The Islamic bank must grant a public sector employee, upon request, a Murabaha financing for purchasing goods, sukuk, or communication packages to settle matured installments during the period from (October 2023 - January 2024), subject to the following conditions:
   a. Suspension of collecting the contractual return on matured installments. b. Suspension of collecting any commissions or fees.
   c. Collecting a declining return of up to 3%.
   d. The Murabaha shall not include installments due to the customer before October 1, 2023. e. The financing is settled or reduced for the employee by the amounts transferred from the Ministry of Finance according to the deduction ratios specified in these Instructions.
2. Allowing the extension of the Ijarah (leasing) period for customers with financing in the form of Ijarah Muntahia Bittamleek (lease ending with ownership), or spreading it over the remaining financing tenure at the same agreed return with the customer according to signed contracts, while allowing exceeding the periods specified in these Instructions.
3. Allowing the customer, upon request, to reschedule financing in Islamic banks using the Tawarruq (commodity murabaha) formula, subject to prior approval from the Palestine Monetary Authority, while complying with the following:
   a. Excluding distressed customers or those with installments due before October 1, 2023. b. The customer must have installments due after October 1, 2023.
   c. Covering matured or upcoming installments from October 1, 2023, to January 31, 2024.
4. Complying with documenting amendments to financing agreements in accordance with the law and sound banking practices.

Article (4)
Instruments for Liquidity Injection in the Economy

1. The bank is committed to designing and adopting the following new products for injecting liquidity into the national economy:
   a. Granting employees temporary advances/financing in accordance with these Instructions. b. Granting employees temporary loans/financing to settle the value of matured or upcoming installments until the end of 2024, in accordance with these Instructions.
   c. Adopting a new product called "Emergency Loan/Financing" aimed at financing the customer's working capital and commercial activities, in accordance with these Instructions.
2. The Palestine Monetary Authority enables banks to obtain emergency liquidity in accordance with these Instructions.

Article (5)
Temporary Advances

The bank must comply with the following:

1. Designing an advance program for public and private sector employees on a salary account, which includes the following:
   a. Determining the maximum advance value an employee can obtain, which shall not exceed under any circumstances the salary amount registered with the bank. b. Determining the repayment mechanisms and specifying whether repayment will occur upon salary receipt.
   c. Documenting the employee's acquisition of the advance in accordance with approved documentation standards or through electronic means.
2. The employee advance program shall allow granting advances to employees, whether they are existing borrowers or not.
3. The temporary advance shall be available to employees whose salaries are transferred to the bank.
4. Advances to employees are disbursed upon the employee's request via the banking app, ATM, or contact center.
5. Establishing a pricing policy specific to the employee advance program, which includes the following:
   a. An interest rate that shall not under any circumstances exceed the interest rate registered in existing financing agreements for current borrowers, or the personal loan interest rate for new borrowers, in cases not related to the employer's delay in paying salaries. b. An interest rate or return not exceeding 3% declining in cases where the employer delays salary payment to employees for force majeure reasons and pursuant to specific Palestine Monetary Authority Instructions.
6. Islamic banks provide the advance referred to in this Article by executing Murabaha financing for purchasing goods, sukuk, or communication packages for the benefit of the customer, subject to complying with the following:
   a. Sharia Standard No. (30) regarding the implementation mechanism and specifications. b. The cost of return and commissions on Murabaha shall not exceed 3% declining in cases where the employer delays salary payment to employees for force majeure reasons, according to Palestine Monetary Authority Instructions.
   c. A return rate that shall not under any circumstances exceed the return rate registered in existing financing agreements for current borrowers, or the personal financing return rate for new customers.

Article (6)
Repayment of Temporary Advances

The bank must comply with the following:

1. Agreeing with the customer on a mechanism for repaying the value of the temporary advance/financing.
2. Allowing interested customers to book the advance against a temporary current debit account in the case of public sector employees.
3. Repaying the value of the advance/financing upon salary receipt or as agreed with the employee.

Article (7)
Uses of Advance/Financing

The bank must comply with the following:

1. Allowing the customer to use the advance or financing, or part thereof, to settle checks drawn on their account or any other obligations.
2. Not using the advance/financing to settle previous loan or financing installments owed by the customer without obtaining their prior consent.

Article (8)
Temporary Loan or Financing

The bank must comply with the following:

1. Designing a temporary loan or financing program for employees, which includes the following:
   a. Determining the value of the loan or financing allowed for the employee to obtain. b. Determining the categories eligible to obtain the loan or financing.
   c. Determining the net value of cash flows minus customer obligations during the period until the end of 2024.
   d. Determining the options available to the customer for repaying the loan or financing, and allowing repayment and re-obtaining it more than once during the period without any commissions or fees. e. Determining the expected costs to be borne by the customer, and repayment mechanisms according to their capacity and cash flows. f. Documenting the customer's acquisition of the loan or financing in accordance with approved documentation standards.
2. The temporary loan or financing program shall include employees, whether they are borrowers or not.
3. Establishing a specific pricing policy for the temporary loan or financing program for employees.
4. Emergency financing granted by Islamic banks to employees shall be in the form of commodity Murabaha.

Article (9)
Uses of Temporary Loan or Financing

The bank must determine the uses of the temporary loan or financing, which shall include the following:

1. Settling matured installments or installments expected to mature until the end of 2024.
2. Allowing the customer the opportunity to increase the loan or financing value above the value of matured or expected installments until the end of 2024.
3. Covering emergency expenses for employees, whether resulting from salary interruption or delayed disbursement, or due to considerations related to economic conditions and distress.

Article (10)
Emergency Loan/Financing

1. The bank must comply with the following:
   a. Designing an emergency loan or financing program for individuals, companies, and small and medium enterprises (SMEs), which includes the following:
   1. Determining the value of the emergency loan or financing allowed for individuals, companies, and projects to obtain.
   2. Determining the categories eligible to obtain the emergency loan or financing, including individuals, companies, and projects operating in the tourism, agricultural, and industrial sectors, as well as projects affected by the crisis.
   3. Determining the net cash flows that the customer will benefit from during the period until the end of 2024.
   4. Allowing repayment of the loan or financing and re-obtaining or benefiting from it again until the end of 2024 without any commissions or fees.
   5. Determining the options available to the customer for repaying the loan or financing, expected costs to be borne, and repayment mechanisms according to their capacity and financial flows.
   6. Documenting the emergency loan or financing in accordance with approved documentation standards.
   b. Establishing a specific pricing policy for the emergency loan or financing program, provided that the interest rate or return does not exceed the approved rate for existing loans or financing of the customer.
   c. The emergency loans or financing granted by Islamic banks to companies and projects shall comply with Sharia provisions and according to financing formulas approved by the Supreme Sharia Supervision Board.
2. The bank may design the emergency loan or financing program to include all customers.

Article (11)
Provisions on Emergency Liquidity

1. The bank may resort to the Palestine Monetary Authority to obtain emergency liquidity according to the following conditions:
   a. The bank must have high financial solvency. b. The Palestine Monetary Authority must be the last resort for obtaining liquidity.
   c. Complying with the Palestine Monetary Authority's conditions for obtaining liquidity.
   d. The bank must need liquidity to reorganize its financial position and liquidity indicators.
2. The bank is prohibited from using emergency liquidity to finance external activities without obtaining prior approval from the Palestine Monetary Authority.
3. The Palestine Monetary Authority may request guarantees from the bank applying for emergency liquidity.
4. The duration of emergency liquidity is relatively short, and must not exceed a maximum of 180 days, and the tenure can be extended for other periods with the approval of the Palestine Monetary Authority's Board of Directors.
5. The Palestine Monetary Authority establishes a specific pricing policy to implement the requirements of these Instructions, and publishes interest rates weekly.

Article (12)
Repeal of Conflicting Provisions

All provisions conflicting with these Instructions are repealed.

Article (13)
Enforcement/Entry into Force

The provisions of these Instructions take effect from the date of their issuance, and all relevant authorities must comply with the following:

1. Completing the design of new products within two weeks from this date at the latest.
2. Beginning to market the new products immediately upon completion of their design and approval.
3. Complying with granting priority in implementation to the temporary advance or financing program for employees, which shall be implemented at the latest from the beginning of next December.

Issued in Ramallah, on: 2023/11/27

Dr. Firas Malham
Governor
[Signature]