Circular No. 2000/206 dated 2000/7/26 Regarding the Management of Investment Portfolios in Jordanian Dinars

Circular No. (2000/206) dated 2000/7/26

This Circular aims to encourage banks to provide services for managing investment portfolios in Jordanian Dinars, thereby achieving diversification and stimulating available investment opportunities for clients, which in turn contributes to raising the efficiency of the Jordanian Dinar Capital Market.

Based on the above, it has been decided as follows:

First: Funds invested within investment portfolios, whether in another form or through any form, are exempt from the statutory cash reserve, provided that they do not decrease at any time below 80% of their nominal value in commercial/financial instruments within each portfolio.

Second: Investment accounts designated for clients' funds held at Islamic banks are exempt from the statutory cash reserve.
(Note: Item (First) was repealed by Circular No. (2004/19) dated 2004/7/25 regarding the instructions on statutory cash reserves.)

Third: These portfolios must not appear in the banks' independent regulatory accounts, nor is it permitted to mortgage, pledge, borrow, or lend them. Without obtaining the client's written consent, the assets existing in these portfolios cannot be disposed of or mortgaged.

a: For banks managing investment portfolios, the minimum capital in the portfolio or the minimum return must be guaranteed by the bank, and the bank must show this commitment in its independent regulatory accounts. This guarantee is justified by the nature of the portfolio type, where the other risks are high and the instruments are of a specialized nature.

b: The bank must set aside provisions necessary to face potential losses that the bank may bear from this type of portfolio.

c: The total guarantees provided by the bank for this type of portfolio must not exceed twice the portfolio's value.

Fourth: Licensed banks must prepare contractual terms regulating the conditions between and among their clients, with the written consent of the clients.

a: These terms must be agreed upon in writing.

b: The investment portfolios consist of various financial investment instruments according to the agreed terms between the bank and its clients.

Fifth: Licensed banks must provide the Central Bank with monthly reports on this activity, including data on the nominal value, cost, market value, and prices of the investment instruments for the funds invested.

The Central Bank may also request from the bank any information it deems necessary regarding this activity.

This Circular takes effect from the date of its issuance.