Regulatory Alerts2023-01-01
Circular No. 222 Current Conditions and Developments
The Palestine Monetary Authority issued Circular No. 222/2023 requiring all Palestinian banks to adopt conservative credit loss provisioning methodologies in response to recent domestic economic disruptions. Banks must upgrade affected customer classifications, apply a 100% risk weight to severe scenarios, exclude non-land collateral for Gaza facilities, classify troubled debts in Stage 3 with 100% provisioning, and allocate an additional 1% of net exposures to the most impacted accounts. These measures must be reflected in financial statements as of September 30, 2023, with ongoing monitoring and supplementary provisions until further regulatory guidance is issued.
Palestine Monetary Authority PALESTINE MONETARY AUTHORITY
Circular No. (222 / 2023) To all banks operating in Palestine Date: Wednesday, October 25, 2023
Subject: Current Conditions and Developments
With reference to the above subject, and in light of recent events and developments witnessed by the country and their repercussions on citizens and all economic sectors, and to ensure the adoption of measures to limit the impact of these developments on the financial status of banks operating in Palestine and to hedge against these risks and their repercussions, and applying conservative methodologies and mechanisms for calculating expected credit losses on all exposures affected by recent events, particularly facilities granted in the Gaza Strip and facilities for workers in the interior, the following measures are requested:
A. Upgrade customer classification stages where indicators warrant such action. B. Apply the following as a minimum to the affected exposures mentioned: 1- Assigning a 100% risk weight to the most severe scenarios. 2- Not recognizing real estate or movable collateral, except for land, for the purpose of calculating losses in the Gaza Strip facilities portfolio. 3- Classifying debts within Stage 3 and provisioning necessary expected credit losses at 100% as losses, where indicators show their default and inability to service their debts during the recent events. 4- Allocating 1% of net exposures as additional credit losses and distributing them to accounts most affected by current conditions. 5- Providing us with the impact of the above measures for review, and subsequently recording them in financial statements as of 2023/09/30, with necessary clarifications.
C. Continue monitoring developments regarding the status of the aforementioned exposures and others, continuously evaluating the extent of their risk increase, and provisioning necessary allowances in accordance with the requirements stated in this Circular until other instructions are issued by the Palestine Monetary Authority based on emerging events and developments.
Supervision Group Palestine Monetary Authority