Palestine Monetary Authority

(Circular No. 2007/160)

To all banks operating in Palestine

Date: Sunday, October 28, 2007

Subject: Credit Bureau Instructions

In line with the Monetary Authority's aspirations to transform into a central bank and its relentless efforts to develop its regulatory systems and policies in alignment with global developments in the banking industry and in accordance with best international practices, and in pursuit of the goal of reducing credit risk volume by providing accurate and comprehensive information that will help expand the banking lending base, embodying the banking sector's role in contributing to economic development, the Monetary Authority has since the beginning of 2006 been developing a credit information service system to meet the needs of the Authority and the banking sector in obtaining appropriate, comprehensive, and accurate information in a timely manner. This is achieved through establishing a comprehensive, unified database containing all data on borrowers and their guarantors.

In light of this, and pursuant to Article 41 of the Currency Law No. (2) of 1997 and Article 43 of the Banks Law of 2002, please find enclosed the instructions governing the Credit Bureau, as well as guidelines for using the system and the forms used for service exchange.

Given the importance of the newly developed system in serving the national economy as a whole, the Monetary Authority expects all banks to fully comply with the instructions without violating any of their provisions. The comprehensiveness and accuracy of the data are paramount, and any breach of the instructions' provisions will negatively impact data comprehensiveness and accuracy. This will lead the Monetary Authority to decide on imposing a financial fine on the bank or suspending its service access until the violation is rectified in accordance with prevailing regulations and instructions.

We thank you for your cooperation.

Yours sincerely,

Dr. George Abed Governor

Ramallah - Al Bireh 1, P.O. Box 452 - Tel.: 02-2409920 - Fax: 02-2409922 Gaza - P.O. Box 4026 - Tel.: 08-2825713 - Fax: 08-2844487 E-mail: info@pma.ps www.pma.ps

Chapter One

First: Data Disclosure Period

1. Financial Data

Financial data for all borrowing customers across all direct and indirect facilities shall be disclosed within five working days from the beginning of each calendar month, excluding official holidays and weekends.

Banks shall upload the aggregate data on a CD for each branch separately and deliver it in person to the Credit Bureau. In line with maintaining banking confidentiality, information exchange between the Monetary Authority and banks will continue via this mechanism until operations commence through the banking network, at which point information will be exchanged via email.

Accordingly, after all financial data for borrowing customers from banks has been uploaded, and to update their credit data at branches by disclosing the unified financial position for each customer, the Monetary Authority will reload the updated data for each borrower individually and at the branch level, and send it to bank administrations, which will disseminate it to branches.

2. Personal Data

Personal data for new borrowers shall be disclosed within three working days from the date the loan is granted, using Form No. (M/T 3) for opening a credit record. Official holidays and weekends are excluded from this disclosure period. We wish to remind you that a credit record cannot be opened for any customer who has not been previously inquired about, except for the specific exceptions regarding current (demand) accounts and facility guarantees. Failing to inquire about a borrower before granting the loan constitutes a violation and breach of the instructions, requiring specific corrective action by the Monetary Authority.

Second: Components of Borrowers' and Guarantors' Personal and Financial Files:

1. Components of Personal Files for Borrowers and Guarantors

These files are processed according to the following classification:

• Borrowers (individuals and legal entities) who are residents and their guarantors.
• Borrowers (individuals and legal entities) who are non-residents and their guarantors.

a. Description of Resident Individual Borrowers' File:

The file for resident individual borrowers consists of a set of essential elements (personal data). The national ID number for individuals is considered the primary key and unified number to be used in creating lending files and exchanging data (without names) between the Monetary Authority and participating parties (the banking sector and specialized lending institutions).

Accordingly, all personal data for the customer must be obtained to create their personal and financial file. The following personal data are considered essential according to system requirements.

Personal Data Required to Create a Resident Customer File:

• ID Number (for resident individuals).
• Full name as it appears on the ID card.
• Gender (Male, Female).
• Marital Status (Single, Married, Divorced, Widowed).
• Date of Birth.
• Place of Birth.
• Spouse's Name.
• Mother's Name.
• Current Address.
• Previous Address.
• Home/Mobile Phone Number.
• Borrower's Occupation.
• Spouse's Occupation.
• Borrower's Status.

This data is used to create resident individual borrower files according to the guidelines in the description of resident borrower files (Form No. M/T 8).

b. Description of Non-Resident Individual Borrowers' File

The file for non-resident individual borrowers consists of a set of essential elements (personal data). The passport number, date of birth, and place of birth for non-resident individuals are considered the primary keys to be used in creating lending files and exchanging data between the Monetary Authority and participating parties.

Accordingly, all personal data for the customer must be obtained to create their personal and financial file. The following personal data are considered essential according to system requirements.

Personal Data Required to Create a Non-Resident Customer File:

• Passport Number.
• Nationality according to the international country code (Appendix No. 9).
• Full name as it appears in the passport in Arabic letters.
• Date of Birth in English numerals.
• Place of Birth.
• Passport Issue Date in English numerals.
• Gender (Male, Female).
• Marital Status (Single, Married, Divorced, Widowed).
• Spouse's Name.
• Mother's Name.
• Current Address.
• Previous Address.
• Home/Mobile Phone Number.
• Borrower's Occupation.
• Spouse's Occupation.
• Borrower's Status.

This data is used to create non-resident individual borrower files according to the guidelines in the description of non-resident borrower files (Form No. M/T 9).

c. Description of Resident and Non-Resident Company and Other Legal Entity Borrowers' File

The file for resident and non-resident company and other legal entity borrowers consists of a set of essential elements (basic data). The entity's registration number with the Companies Registrar or other official institutions, and the numbers assigned by the Monetary Authority under the Office of the President, the Council of Ministers, and the PLO, are considered the primary key and unified number to be used (without names) in creating lending files and exchanging data between the Monetary Authority and the banking sector.

Accordingly, all data for the entity must be obtained to create the basic and financial file. The following basic data are considered essential according to system requirements.

Basic Data Required to Create a Company/Other Legal Entity File:

• Registration number with the Companies Registrar, official institutions, or assigned by the Monetary Authority under the Office of the President, Council of Ministers, and PLO.
• Company/Entity Name.
• Establishment Date.
• Registration Date.
• Headquarters Address of the Company/Entity.
• Residency Status Designation (Resident/Non-Resident).
• Authorized Capital and Currency Type.
• Company/Entity Phone Number.
• Borrower's Status.

This data is used to create files for company and entity borrowers (resident and non-resident) according to the guidelines in the description of company and entity borrower files (Form No. M/T 10).

Third: Disclosure of Borrowers' and Guarantors' Facility Data

a. Monthly Aggregate Facility File

This file is the fundamental element for creating a comprehensive and updated database. It is created based on the ID number for resident individuals, registration number for companies and legal entities, and passport number for non-resident individuals. Bank administrations and specialized lending institutions are responsible for providing the Monetary Authority with the existing facilities file (a unified aggregate file for all branches) within the timeframe mentioned below: within five working days from the beginning of each month, as previously indicated. We wish to emphasize the importance of assigning a specific employee on a continuous basis to be responsible for providing the Monetary Authority with the file. Failure to take this measure results in a violation of the instructions regarding file creation, exposing the bank to penalties stipulated in these instructions due to errors in the file.

To ensure accuracy in disclosing borrower data, the following is a detailed explanation of the elements constituting this file (Form No. M/T 11):

• ID Number, Passport, Company/Entity Registration:

  This item discloses the customer's ID number, including Israeli ID holders from the Holy Land and Green Line citizens. For non-residents, the passport number and registration number with the Companies Registrar/Registrar or entity registration number with official authorities, or the number designated by the Monetary Authority for official institutions (Office of the President, Council of Ministers, PLO), shall be disclosed.

• Residency Type:

  Residency type is designated using code 0 (0) for resident individuals, companies, and entities. For non-resident individuals, companies, and entities, the country code (Appendix No. 9) is used to designate the non-resident borrower's nationality.

• Facility Classification:

  The following codes are used to classify the granted facility as follows (Appendix No. 5):

  1. Code (J) is used to classify facilities granted to joint accounts. Each party in the joint account is disclosed separately as if they were a borrower alone, by disclosing all loan data as required, but only code (J) is used in this item without any other code.
  2. Code (S) is used to classify facilities granted to individual borrowers regardless of residency type.
  3. Code (G) is used to disclose borrower guarantees, whether the guarantor is an individual or another company/legal entity.
  4. Code (C) is used to disclose facilities granted to company and other legal entity borrowers regardless of residency type.

• Granting Bank Number:

  This item discloses the bank number, branch, and facility grantor. The bank and branch numbers are determined from the attached table (Appendix No. 10).

• Data Disclosure Period:

  This item discloses the data period used to provide the Monetary Authority with this file. Disclosure is divided into two items:

  a. Month disclosure, in full two-digit numerals (MM). b. Year disclosure, in full four-digit numerals (YYYY).

• Facility Type:

  This item discloses the type of granted facility using the code for each facility as stated in (Appendix No. 3).

• Grant Currency:

  This item specifies the currency type of the granted facility as stated in the administrative approval, using the code for each currency as stated in (Appendix No. 11). Regarding Islamic banks, if financing ceilings for Murabaha are granted, the currency type is disclosed as stated in the administrative approval for granting the credit ceiling, not the currency type used in individual Murabaha transactions, which may differ from the administrative approval.

• Economic Sector:

  This item discloses the borrower's economic sector type according to the economic sector analysis in (Appendix No. 2). To indicate the borrower's economic sector type, economic sector codes are used as stated in the Appendix.

• Customer Status Evaluation:

  Given the importance of this item in credit evaluation, accuracy in disclosing the customer's compliance with repayment terms is required. The appropriate item for the customer's status must be determined at the end of each month according to the item's conditions from (0–9) to indicate the customer's status. This code will be disclosed in environment (10–1) (Appendix No. 6), and codes (9–0) will be used for inquiry responses. It will continue to reflect the customer's status regarding compliance with grant (repayment) terms for the preceding 24 months.

  We wish to remind you that the default classification in this table is not linked to any other instructions issued by the Monetary Authority on the same subject. To clarify the meaning of item (9) in the table regarding debt restructuring, we inform you that any defaulted debt for which a provision has been set up, or any debt that has been rescheduled one or more times and is constituted by the customer's regular repayment, is not classified among restructured debts. Debt restructuring only relates to rearranging repayment terms before default and before setting up a provision. If a customer defaults on any of the granted facilities, they are considered in default across the entire portfolio regardless of their status in other facilities.

• Approved Limit:

  This item discloses all types of granted facilities (direct and indirect) according to the limits or balances approved by the Administrative Committee and recorded in the automated system.

• Utilized Balance (Existing):

  This item discloses the total balance utilized from the approved limit. This item is only used to disclose balances utilized in Murabaha transactions executed through the approved limit.

• Provision Amount:

  This item discloses the amount of the provision set up against the defaulted debt according to the Monetary Authority's instructions on this matter.

• Facility Grant Date:

  This item discloses the date the facility was granted as recorded in the bank's automated system.

• Last Installment Due Date:

  This item discloses the due date of the last installment payable by the customer as stated in the installment repayment schedule. Regarding Islamic banks, this is considered the due date of the last installment in any individual Murabaha transaction executed through the approved limit, which has the furthest due date.

• Outstanding Installment Value:

  This item discloses the total installments due for payment by the customer, regardless of their due dates or whether provisions have been set up against them.

• Periodic Installment Type:

  This item discloses the type of periodic installment for facility repayment according to the classification in (Appendix No. 7) based on the repayment terms in the facility grant agreement. Regarding Islamic banks, the periodic installment type for Murabaha ceiling financing transactions is the type of periodic installment for the Murabaha transaction with the furthest due date recorded in the automated system.