Palestine Monetary Authority

PALESTINE MONETARY AUTHORITY

Instructions No. (1) of 2024

Regarding the Credit Portfolio of Specialized Lending Institutions

Based on the provisions of Decision No. (132) of 2011 on the Licensing and Supervision of Specialized Lending Institutions, particularly Articles (3, 21) thereof,

In accordance with the powers delegated to us,

And in pursuit of the public interest,

We have issued the following Instructions:

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Article (1)

Objective and Scope of Application

1. The provisions of these Instructions aim to reorganize and evaluate existing credit under current circumstances.
2. The provisions of these Instructions apply to all specialized lending institutions licensed by the Palestine Monetary Authority.

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Article (2)

Procedures for Dealing with Existing Loans and Financing

The specialized lending institution must adhere to the following:

1. Defer or not deduct periodic installments for borrowers residing in the Gaza Strip until 2024/06/30 without interest.
2. Provide the option to defer, schedule, or structure periodic installments for borrowers residing in the West Bank until 2024/06/30 without any increase in contractual interest rates, in proportion to the borrowers' solvency if they are directly or indirectly affected by current circumstances.
3. Do not collect any fees or commissions on deferral, scheduling, or structuring operations.
4. Provide the Palestine Monetary Authority with a detailed monthly report within the first five working days of each month starting from March of the current year, regarding the procedures applied to deal with the loan and financing portfolio.

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Article (3)

Continuous Monitoring and Assessment of Financial Impact and Expected Credit Losses

The specialized lending institution must ensure that portfolio classifications reflect the financial status and underlying risks in a timely manner, and commit to the following:

1. Conduct a continuous assessment of the extent to which indicators of significant increase in credit risk affect the portfolio, including transferring loans that are not considered sustainable or confirmed as non-performing to Stage 3 of Expected Credit Losses.
2. Apply conservative methodologies and mechanisms for calculating Expected Credit Losses on the loan and financing portfolio in the West Bank, in accordance with the requirements of International Standard No. (9), as well as committing to assigning a minimum weighting of 60% to the most severe scenarios and 40% to medium scenarios.
3. Apply conservative methodologies and mechanisms for calculating Expected Credit Losses on the loan and financing portfolio in Gaza, in accordance with the requirements of International Standard No. (9), as well as committing to assigning a weighting of 100% to the most severe scenarios.
4. Identify the economic sectors, projects, areas, and categories most affected and take this into account in the criteria for the transition of credit risk from one stage to another.
5. Include current and future variables of economic conditions in the scenarios of Expected Credit Loss calculation models.
6. Continuously monitor the repercussions of current situations and any potential scenarios on capital and liquidity.
7. Provide the Palestine Monetary Authority with a detailed monthly report within the first five working days of each month starting from March of the current year, regarding the measures taken and the expected impact on the provisions of this Article.

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Article (4)

General Provisions

The specialized lending institution must limit consumer financing during the current period and adhere to the following:

1. Design loan programs to meet basic needs and finance developmental projects to help them overcome the repercussions of the current crisis.
2. Continue to provide lending services for developmental projects to ensure the continuity of the commercial and economic cycle, within the available resources and mechanisms.

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Article (5)

Repeal

Instructions No. (1) of 2023 regarding the Credit Portfolio of Specialized Lending Institutions are repealed.

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Article (6)

Implementation and Enforcement

All competent authorities must, each within their respective jurisdiction, implement the provisions of these Instructions and apply them from the date of their issuance.

Issued in Ramallah, on the date: 07/02/2024 AD

Dr. Firas Malham Governor

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Ramallah & Al-Bireh Governorate - Palestine P.O. Box 452 - Palestine P.O. Box - Ramallah and Al-Bireh Governorate info@pma.ps | Fax: +970 2 2415310 | Fax | Tel: +970 2 2415251 | Phone | Postal code: P6160675 | Postal Code www.pma.ps