Circular No. 162: International Financial Reporting Standard 9

Palestine Monetary Authority
PALESTINE MONETARY AUTHORITY

Circular No. (162/2023)
To all banks operating in Palestine
Date: Monday, July 31, 2023

Subject: International Financial Reporting Standard No. (9)

With reference to the above subject, and subsequent to the requirements of Instruction No. (2018/2) regarding the implementation of International Financial Reporting Standard "9" and Instruction No. (2008/01) regarding the classification of credit facilities and provisions, the Authority is reviewing the aforementioned instructions and making the necessary amendments to comply with the Standard's requirements, particularly those related to the calculation and valuation of assets, as well as other requirements. To enable us to take the necessary actions, you are requested to prepare a quantitative impact study for calculating expected credit losses in accordance with the requirements of Standard No. "9", and for calculating held-for-sale assets in accordance with the requirements of Standard No. 5 and measuring their value in accordance with the requirements of Standard No. 13, for the financial statements as of June 30, 2023, while observing the following:

1. Treat Stage 3 provisions in accordance with the requirements of Standard No. 9 as contra-asset accounts, regardless of the requirements of Instruction No. (2008/01).
2. Recognize interest revenue on net exposures within Stage 3 in accordance with the requirements of Standard No. 9 for financial reporting purposes.
3. Treat only Stage 1 provisions as general provisions, so they are recognized for regulatory capital adequacy assessment purposes, and treat Stage 2 and Stage 3 provisions as specific provisions.
4. Use the Bank's own estimates for calculating the liquidation value of collateral in accordance with the requirements of Standard No. 9.
5. Include exposures overdue for more than 6 years in the Bank's financial statements in accordance with international standards requirements.

The quantitative impact calculation must be provided to us no later than September 15, 2023, within a report detailing all calculation specifics and methodologies applied.

Supervisory Group
Palestine Monetary Authority

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