Regulatory Alerts2016-01-01
Circular No. 93 (2016): Updated Version of the Borrower Credit Classification System
The Palestine Monetary Authority issued Circular No. 93 (2016) mandating the implementation of Version IV of the Borrower Credit Classification System, which separates individual and corporate credit scoring models and recalibrates risk weights and grades to better reflect Palestinian banking conditions and Basel Committee recommendations. The updated framework introduces distinct risk variables for borrower age, credit shopping inquiries, salary guarantees, plastic card utilization, and corporate leverage ratios, while redefining distress classifications to differentiate between late payments (1–89 days) and default (90+ days). Financial institutions must adopt the revised scoring tables, evaluation explanations, and risk redistribution mechanisms effective June 5, 2016, to enhance credit risk mitigation and portfolio quality.