Palestine Monetary Authority

PALESTINE MONETARY AUTHORITY

Circular No. (2014/83)
To all banks operating in Palestine
Date: Wednesday, December 17, 2014

Subject: Development items implemented on 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 best practices, and driven by the goal of reducing credit risks by providing accurate, comprehensive, and up-to-date information to users from banks and lending institutions, which will help expand the base of bank lending, embodying the role of lending entities in contributing to economic development.

Furthermore, 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 in various aspects of the system to achieve its intended purpose and serve lending operations and credit decision-making.

In light of this, and based on Circular No. 2007/160 dated October 28, 2007, which regulates the operation of the credit information system, please find attached the most important amendments made to the credit information system, including:

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

Accordingly, all banks are requested to adopt the attached explanations and amendments for disclosure to the Credit Information Bureau and to comply with the instructions of the new version from its date.

Public Relations and Market Discipline 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 loans and mortgages, and facilities for medium and small enterprises. The following amendments were made:

   • The legal form of the account was modified from (Individuals S, Companies C, Joint Accounts J) to (Individual Facilities SI, Company Facilities CO, Medium and Small Enterprise Facilities SM), according to the classifications provided in Appendix No. (3) attached to the circular, and linked to the new additional item in the demographic (personal) data item, which is "Purpose of the Facility."

   • The demographic data item on the credit record opening screen was modified to align with the purpose of the facility 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 through the record opening screen. The purpose of defining demographic data for facilities granted to medium and small enterprises is to refer to the explanatory forms mentioned above when filling in the fields associated with each type of facility.

2. The following items were added to the demographic data of borrowers on the record opening screen:

   • Total borrower income
   • Currency type of borrower income
   • Social Security Number or National ID for non-resident borrowers, if available

3. The following items were added 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 according to the option selected in the "Purpose of the Facility" item

4. An item was added to the guarantor data screen regarding the type of collateral provided by the guarantor.

5. A feature was added to fetch demographic data for the guaranteed party, similar to the borrower.

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Second: Amendments to the Credit Report

1. The "Blacklist" and "Restricted Persons" items were removed from the credit report.

2. Disclosure of the total unpaid installments due in the "Total Financial Position" field of the borrower, valued in US Dollars.

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

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

5. Disclosure of data on new facilities and court decisions as follows:

   • Leasing finance
   • Retailers
   • Service companies
   • Real estate developers
   • Court decisions related to banking cases

For the purpose of distinguishing the above institutions in the credit report, Appendix No. (15) can be referred to.

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Third: Amendments to the Financial File Structure

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

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

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Fourth: Amendments to Appendices, Forms, and Central Codes of the System

In parallel with the development process of the credit information system, a number of amendments were made to the forms, appendices, and central codes of the credit information system to align with the development process, where:

1. The appendix related to determining the borrower's nationality was modified by reclassifying nationality codes using ISO codes in disclosing the nationalities of borrowers and guarantors according to the classifications provided in Appendix (2) of the circular.

2. The appendix related to facility classification (S, C, J) was modified by redistributing the items contained therein to align with the development process according to the following modified appendices:

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

3. The appendix related to facility types was modified by adding a special code for the following facility types:

   • Revolving Purchase Facilities (Purchase Ceiling) (F021)
   • Financial/Operating Leasing Company Facilities (F022)

   These are to be disclosed within the monthly financial file according to the classifications provided in Appendix No. (6) of the circular.

4. The appendix related to the borrower's status was modified by reclassifying borrowers according to the classifications provided in Appendix No. (14) of the circular.

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Fifth: Amendments to Disclosure Mechanisms

1. Disclosure of Guarantee Ceilings and Sustainable Credits

   Disclosure of guarantee ceilings / sustainable credits is done as follows:

   • Declare only the guarantee ceilings / credits granted to the client and update the outstanding balance with each utilization from the guarantee ceiling / credit.
   • If guarantees / credits are issued in more than one currency from the granted ceiling, all currencies are valued according to the currency of the granted ceiling and evaluated according to the exchange rate issued by the Palestine Monetary Authority.
   • If the client is granted guarantee ceilings / credits in different currencies and under separate administrative approvals, each ceiling is declared separately.

2. Disclosure of Revolving Purchase Ceilings

   To avoid repeated disclosure of utilization movements on revolving purchase ceilings, which negatively affects the client's credit classification because each utilization of the ceiling is read as a new granting operation for the client, the same disclosure mechanism for guarantee ceilings and sustainable credits explained in Item One is adopted when disclosing revolving purchase ceilings.

3. Disclosure of Interest Rate and Interest Type

   Since banks do not calculate interest on some types of facilities (Guarantees F006, Sustainable Credits F008, and Overdraft Accounts F003), banks are allowed to declare the interest item in the financial file with the code (0), while declaring the interest type item with the code (9 – No Interest) according to Appendix No. (12) of the circular.

4. Disclosure of Percentage Items in the Monthly File

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

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

5. Disclosure of Total Enterprise Assets

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

6. Disclosure of Demand-Open Facilities

   Demand-open facilities are defined for disclosure purposes in the Credit Information System as facilities with an outstanding amount of four hundred dollars or more ($400) or its equivalent in other currencies for a period of no less than seven consecutive working days from the date of disclosure, excluding holidays and official celebrations.

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General Provisions:

• Banks shall stop disclosing the monthly financial file according to the current file structure and shall disclose customer financial data according to the attached developed file structure from its date.
• For the purpose of covering the gap in disclosing facilities granted to medium and small enterprises and housing and mortgage loans that were/will be granted during the period from October 1, 2014, to December 30, 2014, all banks are requested to send demographic files for the enterprise and mortgage sectors, such that subsequent legal declarations after the issuance of the circular are stopped.
• Adoption of disclosure of all data on new facilities according to the requirements of the developed credit record opening screen from January 1, 2015.
• The remaining requirements and conditions contained in Circular No. 2007/160 dated October 28, 2007, regulating the operation of the credit information system, remain unchanged.
• The periodic bulletin of exchange rates issued by the Palestine Monetary Authority is adopted for the purpose of valuing traded currencies.

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Emphasis on the necessity of complying with the explanatory instructions organizing some disclosure mechanisms for customers contained in Item Two of Palestine Monetary Authority Circular No. 2014/11 dated January 20, 2014, when declaring borrower customers and their guarantees.

This circular takes effect from its date of issuance and repeals anything inconsistent with it, and applies to banks to ensure taking measures to regularize their status according to the text of the circular.

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Index of Appendices for the Credit Information System

Appendix No.	Content
(1) Appendix No.	Borrower/Guarantor Document Type
(2) Appendix No.	International Country Codes (Purpose of determining borrower/guarantor nationality)
(3) Appendix No.	Facility Category Classification
(4) Appendix No.	Parties Involved in the Facility
(5) Appendix No.	Bank and Branch Numbers
(6) Appendix No.	Facility Type (Code for Direct and Indirect Facilities)
(7) Appendix No.	International Currency Codes (Grant Currency)
(8) Appendix No.	Economic Sector
(9) Appendix No.	Customer Status Evaluation
(10) Appendix No.	Periodic Installment Type
(11) Appendix No.	Legal Procedures
(12) Appendix No.	Interest Type
(13) Appendix No.	Collateral Codes Provided
(14) Appendix No.	Borrower Status
(15) Appendix No.	Private/Public Sector Company Codes

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