Palestine Monetary Authority

Circular No. (2014/82)
To all lending institutions operating in Palestine
Date: Wednesday, December 17, 2014

Subject: Overview of Developments Made to the New Version (Version III) of the Credit Information System

In line with the Palestine Monetary Authority's aspirations to transform into a central bank and its continuous efforts to develop its regulatory systems and policies in harmony with developments in the Palestinian banking environment and in accordance with international policies, and with the goal of reducing credit risks by providing accurate, comprehensive, and updated information to users from banks and lending institutions, which will help expand the base of banking lending, embodying the role of lending institutions in contributing to economic development.

Following discussions and meetings held with the banking sector and lending institutions, the Palestine Monetary Authority has developed the third version of the credit information system, which was launched in early 2008. A comprehensive evaluation of the system was conducted, resulting in developments across various aspects of the system to achieve its intended purpose and support lending operations and credit decision-making.

In light of the above, and based on Memorandum No. 2009/26 dated 2009/05/26 governing the operation of the credit information system, please find attached the key amendments made to the credit information system, including:

• Amendments to input screens
• Amendments to the credit report
• Amendments to the financial file structure
• Amendments to disclosure mechanisms

Accordingly, all lending institutions are requested to adopt the attached clarifications and amendments for disclosure purposes to the Credit Information Bureau, and to comply with the instructions of the new version effective from its date.

Public Relations and Market Awareness Department
Palestine Monetary Authority

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First: Amendments to the Record Opening Screen

1. The credit record opening screen has been developed to include all types of facilities and their classifications, including housing and mortgage loans, and facilities for medium and small enterprises, with the following amendments:

   • Amendment to the legal form of the account from (Individuals S, Companies C, Joint Accounts J) to (Company Facilities CO, Medium and Small Enterprise Facilities SM, Individual Facilities SI) according to the classifications in Annex No. (3) attached to the Circular, linked to the new additional item in the demographic (personal) data item, which is "Purpose of the Facility".
   • Amendment to the demographic data item on the credit record opening screen to align with the facility purpose specified by the data entry clerk, by adding new items related to demographic (personal) data for facilities granted to medium and small enterprises (Form No. 5) and housing and mortgage loans (Form No. 6) to be disclosed via the record opening screen. The purpose of defining demographic data for housing/mortgage loans and facilities for medium and small enterprises is to reference the illustrative results mentioned above when defining the collateral rights associated with each type of facility.

2. Addition of the following items to the borrowers' demographic data on the record opening screen:

   • Total borrower income
   • Income currency type for the borrower
   • Social security number or national ID for non-resident borrowers, if applicable

3. Addition of the following items to the basic financial data of borrowers on the record opening screen:

   • Interest type
   • Interest rate
   • Grace period (in months)
   • Facility classification that appears automatically based on the option selected in the "Purpose of the Facility" item

4. Addition of an item for the type of collateral provided by the guarantor on the guarantor data screen.

5. Addition of a feature to fetch demographic data for the guarantor, similar to the borrower.

6. Granting authorization to the data entry clerk to amend the borrower's demographic data during the credit record opening process, enabling the operator of the record opening process to amend demographic data if necessary without resorting to the personal amendments screen. The following data are excluded from the amendment process:

• Client file transfer
• Client ID number
• Nationality of the borrowing client
• Facility file number
• Facility classification

Second: Amendments to the Credit Report

1. Removal of the blacklist and restricted persons items from the credit report.

2. Disclosure of the total unpaid due installments in the borrower's total financial position field, valued in US dollars.

3. Disclosure of the guarantor's ID number and the type of collateral provided by each guarantor at the single facility level.

4. Disclosure of the guarantor's outstanding balance according to updates made to the borrower's balance.

5. Disclosure of new facility data and court rulings as follows:

   • Trade finance
   • Retailers
   • Service companies
   • Real estate developers
   • Court rulings related to banking cases For the purpose of distinguishing institutions in the credit report, Annex No. (15) may be referenced.

Third: Amendments to the Financial File Structure

For the purpose of disclosing granted facility data, the following items have been added to the new financial facility file structure (txt.file) Form No. (1):

• Grace period for facilities (in months)
• Interest rate

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Fourth: Amendments to System Annexes and Central Codes

In parallel with the development process of the credit information system, a series of amendments were made to the annexes and central codes of the credit information system to align with the development, including:

1. Amendment to the annex regarding borrower nationality determination, by reclassifying nationality codes using ISO codes when disclosing the nationalities of borrowing clients and guarantors according to the classifications in Annex (2) of the Circular.

2. Amendment to the annex regarding facility classification, by redistributing the items contained therein (S, C, J) to align with the development process according to the following amended annexes:

   • Annex No. (1) - Borrower/Guarantor Document Type
   • Annex No. (3) - Facility Category Classification
   • Annex No. (4) - Parties Involved in the Facility

3. Amendment to the annex regarding facility types, by adding a specific code for the following facility types:

   • Revolving ceiling facilities (Purchasing ceiling) (F021)
   • Financial/Operating Leasing Company Facilities (F022) They must be disclosed within the monthly financial file according to the classifications in Annex (6) attached to the Circular.

4. Amendment to the annex regarding borrower status, by reclassifying borrowers according to the classifications in Annex No. (14) attached to the Circular.

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5. Amendment to the financial facility file structure for borrowing clients, by adding the items referred to in the third section of the Circular according to Form No. (1) attached to the Circular.

6. Amendment to the personal file structure form for resident borrowers, by adding the disclosure requirement for monthly income value and income currency according to Form No. (3) attached to the Circular.

7. Amendment to the personal file structure form for non-resident borrowers, by adding the disclosure requirement for social security number or national ID, if applicable, according to Form No. (4) attached to the Circular.

Fifth: Amendments to Disclosure Mechanisms

1. Disclosure of Guarantor Ceilings and Sustainable Credits

Guarantor ceilings / sustainable credits are disclosed according to the following mechanisms:

• Disclosure of only the guarantor ceilings / credits granted to the client, updating the outstanding balance with each utilization of the guarantor ceiling / credit.
• If guarantor ceilings / credits are issued in multiple currencies from the granted ceiling, all currencies are valued according to the granted ceiling's currency and evaluated based on the exchange rate bulletin issued by the Palestine Monetary Authority.
• If the client is granted guarantor ceilings / credits in different currencies under separate administrative approvals, each ceiling is disclosed separately.

2. Disclosure of Revolving Purchasing Ceilings

To avoid repeated disclosure of utilization movements on revolving purchasing ceilings, which negatively impacts the client's credit classification since each utilization is read as a new granting operation for the client, the same disclosure mechanism for guarantor ceilings and sustainable credits outlined in Item 1 above is adopted when disclosing revolving purchasing ceilings.

3. Disclosure of Interest Rate and Interest Type

Since lending institutions do not calculate an interest rate on certain facility types (guarantees), overdrawn current accounts (F003), and sustainable credits (F006), lending institutions are permitted to disclose an interest rate item with the number (0) in the financial file, while disclosing the interest type item with the code (9 - No Interest) according to Annex No. (12) attached to the Circular.

4. Disclosure of Percentage Items in the Monthly File

The monthly financial file discloses all items expressed as a percentage as a whole number without decimals or the percentage sign (%), for example:

• 65 instead of 65%
• 0.65 or 65%
• 4.5 instead of 4.5%
• 0.045 or 4.5%

5. Disclosure of Total Enterprise Assets

For the purpose of disclosing total assets of medium and small enterprises, and since an enterprise may obtain more than one facility in different currencies from the same institution, the total assets of the enterprise are disclosed valued in US dollars regardless of the currency of the granted facilities.

6. Disclosure of Demand Overdraft Facilities

Demand overdraft facilities for disclosure purposes in the credit information system are defined as overdraft facilities with an amount of four hundred US dollars or more ($400) or its equivalent in other currencies for a period of no less than seven consecutive working days from the disclosure date, excluding holidays and official public holidays.

General Provisions

• Lending institutions shall cease disclosing the monthly financial file according to the current file structure and disclose client financial data according to the developed file structure implemented herein effective from its date.
• For the purpose of covering the disclosure gap for facilities granted to medium and small enterprises and housing and mortgage loans that were/will be granted during the period from 2014/10/01 to 2014/12/30, all lending institutions are requested to send the demographic files for the enterprise and mortgage sectors as usual, so that subsequent legal disclosures are available after the issuance of the Circular.
• Adoption of disclosure for new facility data according to the requirements of the developed credit record opening screen effective from 2015/01/01.
• The remaining requirements and conditions within Memorandum No. 2009/26 dated 2009/05/26 governing the operation of the credit information system remain unchanged.

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• The periodic exchange rate bulletin issued by the Palestine Monetary Authority is relied upon for valuing circulating currencies.
• Emphasizing the necessity to comply with the explanatory instructions governing certain client disclosure mechanisms contained in the second section of Palestine Monetary Authority Circular No. 2014/12 dated 2014/01/20 when disclosing borrowing clients and guarantors.
• This Circular takes effect from its date of issuance and repeals anything inconsistent with it. Lending institutions are required to ensure taking measures to regularize their status according to the provisions of this Circular.

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Index of Annexes for the Credit Information System

Annex No.	Borrower/Guarantor Document Type
Annex No. (1)	Borrower/Guarantor Document Type
Annex No. (2)	International Country Codes (for determining Borrower/Guarantor Nationality)
Annex No. (3)	Facility Category Classification
Annex No. (4)	Parties Involved in the Facility
Annex No. (5)	Bank Numbers and Branches
Annex No. (6)	Facility Type (Direct and Indirect Facility Codes)
Annex No. (7)	International Currency Codes (Granting Currency)
Annex No. (8)	Economic Sector
Annex No. (9)	Client Status Evaluation
Annex No. (10)	Periodic Installment Type
Annex No. (11)	Legal Procedures
Annex No. (12)	Interest Type
Annex No. (13)	Collateral Type Codes
Annex No. (14)	Borrower Status
Annex No. (15)	Private/Public Sector Company Codes