Instructions No. (2012/03): Working Capital and Cash Guarantees

Palestine Monetary Authority

Instructions No. (2012/03)

To all exchange companies and money changers operating in Palestine

Date: Tuesday, 25 September 2012

Subject: Working Capital and Cash Guarantees

Based on the provisions of Presidential Decree No. (13) for the year 2008 concerning the licensing and supervision system for the money exchange profession, the following instructions govern working capital and cash guarantees:

1. Capital

a. Paid-up Capital:

1. Paid-up capital refers to: (net working capital plus deposits and guarantees with the Monetary Authority, fixed assets, and reasonable intangible assets).
2. The minimum paid-up capital for exchange companies shall be as specified in Instructions No. (1) 2012.
3. The paid-up capital stated in the memorandum and articles of association approved by the Monetary Authority must match the definition of paid-up capital in item (a).

b. Working Capital for Exchange Companies:

1. Net working capital refers to: current assets (including cash, purchased checks in various currencies, unmanufactured precious metals, balances with banks, and credit balances with correspondents in various currencies) minus liabilities (outstanding facility balances obtained by the changer from banks and correspondent balances).
2. Net working capital must not be less than 75% of paid-up capital.
3. The value of unmanufactured precious metals must not exceed 20% of net working capital.
4. Fixed assets and intangible assets shall be reduced by 15% from paid-up capital.
5. The changer must comply with the following regarding fixed assets: a. The fixed asset must be registered under the changer's trade name. b. The asset must be used for exchange business purposes, not for investment. c. Assets must be recorded and depreciated in accordance with accounting standards. d. They must be reflected in audited financial statements.
6. The value of personal withdrawals by partners in an exchange company (ordinary or limited) must not exceed the current period's realized profits. Personal withdrawals are prohibited if current losses are incurred, accumulated losses exist, or if the minimum capital requirements specified in our Instructions No. (1) for 2012 are not met.

c. Working Capital for Individual Changers:

1. Net working capital for an individual refers to what was indicated in item (1/b) of these instructions.

2. Paid-up capital refers to: (net working capital plus deposits and guarantees with the Monetary Authority).

3. The value of unmanufactured precious metals must not exceed 20% of net working capital.

4. Fixed assets and intangible assets shall not be deducted as part of paid-up capital.

5. The value of personal withdrawals by the individual changer must not exceed the current period's realized profits. Personal withdrawals are prohibited if current losses are incurred or accumulated losses exist.

6. Bank Guarantee/Cash Deposit/Cash Guarantee:

a. Bank Guarantee/Cash Deposit: The changer shall provide a bank guarantee to the Monetary Authority or a cash deposit in an account with the Monetary Authority, such that the guarantee expires one month after the license expiry date unless renewed, as follows:

1. Exchange Companies

Value of Guarantee/Cash Deposit	Legal Form
5,000	Ordinary, Public, Limited Ordinary Company
10,000	Private Joint-Stock Company
20,000	Public Joint-Stock Company

In US Dollars

2. Individual Changers

Value of Guarantee/Cash Deposit	Category
12% of Authorized Capital	Category 1
7% of Authorized Capital	Category 2
5% of Authorized Capital	Category 3

b. The changer is obligated to deposit a cash guarantee with the Monetary Authority upon licensing, as follows:

1. Within city limits:

Cash Guarantee	Legal Form
10,000 US Dollars	Ordinary, Public, Limited Ordinary Company
25,000 US Dollars	Private Joint-Stock Company
50,000 US Dollars	Public Joint-Stock Company

2. Outside city limits:

Cash Guarantee	Legal Form
5,000 US Dollars	Ordinary, Public, Limited Ordinary Company
15,000 US Dollars	Private Joint-Stock Company
25,000 US Dollars	Public Joint-Stock Company

c. Deposit of cash guarantee with the Monetary Authority for each branch, as follows:

Cash Guarantee	Legal Form
5,000 US Dollars	Ordinary, Public, Limited Ordinary Company
10,000 US Dollars	Private Joint-Stock Company
20,000 US Dollars	Public Joint-Stock Company

d. Deposit of a cash guarantee with the Monetary Authority valued at 50,000 US dollars to meet requirements for issuing and accepting remittances outside Palestine.

e. The maximum limit for the total of bank guarantees, cash deposits, and cash guarantees held by the Monetary Authority for a changer legally structured as a company (ordinary public, limited ordinary, private joint-stock), including cash guarantees for branch licensing and remittance operations, is 50,000 US dollars.

f. The maximum limit for the total of bank guarantees, cash deposits, and cash guarantees held by the Monetary Authority for a changer legally structured as a company (public joint-stock), including cash guarantees for branch licensing and remittance operations, is 100,000 US dollars.

3. Rectification of Status: For the purpose of calculating existing fixed assets, all exchange companies must submit a detailed statement including fixed assets, asset value, purchase date, depreciation rates, net book value, and intangible assets. The statement must be signed on behalf of the company, stamped, and signed by the auditor within one month of its date.

Compliance with these instructions begins from the date of issuance and repeals anything inconsistent with them.

Supervision and Inspection Department Palestine Monetary Authority

Ramallah - Al Bireh 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