Palestine Monetary Authority

PALESTINE MONETARY AUTHORITY

Circular No. (2016/3)

To all local banks
Date: Monday, January 11, 2016

Subject: Minimum Disclosure Requirements in the Annual Report

In continuation of Circular No. (2015/03) dated 12/01/2015 regarding the annual report requirements for local banks and final data forms, we attach to you the modified minimum disclosure requirements for the annual report of local banks.

We hope all local banks will adhere to these requirements when preparing and printing the annual report and providing the Authority with a final copy thereof. Please note that printing and issuing the annual report does not require prior approval from the Palestine Monetary Authority; however, the Authority reserves the right to review compliance with the above, and failure to comply will result in financial penalties in accordance with the provisions of the law.

All provisions conflicting with this Circular are hereby repealed, and the final financial data forms remain unchanged and unmodified.

Supervision and Inspection Department
Palestine Monetary Authority

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www.pma.ps

Ramallah - Palestine P.O. Box 452 | Tel: +970 2 2415250 | Fax: +970 2 2409922 | +970 2 2409922: Fax | +970 2 2415250: Phone | P.O. Box 452 Ramallah - Palestine Gaza - Palestine P.O. Box 4026 | Tel: +970 8 2825292 | Fax: +970 8 2844487 | +970 8 2844487: Fax | +970 8 2825292: Phone | P.O. Box 4026 Gaza - Palestine Email: info@pma.ps | info@pma.ps: Email

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Minimum Disclosure Requirements in the Annual Report (for Local Banks)

The annual report of a local bank must include the following items:

1. Cover Page: The Bank's Vision and Mission.

2. Chairman's Message.

Board of Directors' Report, which must include at a minimum the following:

• Summary of the Bank's main activities.
• Brief overview of key financial and non-financial achievements.
• The Bank's geographical spread, including the number of branches, offices, ATMs, and their addresses.
• Detailed information disclosure on the financial results of its subsidiaries and associates.
• Name of the Bank's Chairman, names of Board members, biographical sketches, qualifications, and Board committees.
• Composition of the Senior Executive Management (General Manager, Deputy General Managers, and Assistant General Managers), their names, titles, biographical sketches, and qualifications.
• Names of major shareholders and the number of shares held by them (those holding more than 10% of the Bank's shares), in addition to names held by the Chairman, Board members, General Manager, and their first-degree relatives.
• The Bank's competitive position (market share, and data sources).
• The Bank's organizational structure (final, showing main departments and branches).
• Classification of the Bank's and its subsidiaries' employees according to their academic qualifications, number of training courses and their topics (diverse banking operations, internal control, risk, anti-money laundering, behavioral and managerial skills, others), in addition to the number of trainees.
• Risks (overview of the Bank's risk policy, anti-money laundering policy, know your customer policy, and banking secrecy policy), in addition to risk management methodologies and processes.
• The Bank's strategic direction and future plan for the coming year.
• Detailed disclosure of allowances, salaries, bonuses, and any other benefits granted to the Chairman, Board members, and General Manager.
• Transactions with related parties.
• Corporate social responsibility, donations, and grants paid by the Bank during the current financial year.
• Trading activity of the Bank's shares in the financial market during the year.

3. The Bank's financial statements, external auditor's report, and Sharia Supervisory Board report for Islamic banks.

4. Board of Directors' Declarations regarding the following:

• Material matters that may affect the Bank's going concern status.

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5. Accuracy of financial data, availability of an effective control system in the Bank, and existence of internal control and audit systems for financial reporting in the Bank and maintenance of such systems.

• Use of a framework to assess the effectiveness of internal control and audit systems in the Bank.
• Accuracy, completeness, and correctness of information and data contained in the annual report.

6. Agenda of the Ordinary and Extraordinary General Assembly for the current financial year.

7. Any decisions issued by external authorities that have a material impact on the Bank's operations.

Bank's Governance Manual, disclosing the following:

• Chairman, Board members, and General Manager.
• Role and responsibilities of the Chairman.
• Composition of Board members, their job functions, and membership status for each, in addition to Board committees and their corresponding tasks and duties.
• Board practices and conflict of interest controls.
• Instances of abstaining from voting due to conflicts of interest, and instances of approving contracts or transactions involving conflicts of interest in accordance with the Companies Law and Banking Law.
• Number of Bank Board meetings, number of attendances, and attendance rate.
• Brief overview of the Sharia Supervisory Board, its members, qualifications, working mechanism, tasks, and appointment of the Sharia Auditor (for Islamic banks).

Internal control and audit systems and external audit, and their adequacy regarding the following:

• Internal Audit ✓
• External Audit ✓
• Compliance ✓

8. Bonus and incentive granting policy.

9. Transparency and Disclosure (discussing the Bank's policy regarding transparency and disclosure).

10. Extent of compliance with the implementation of governance principles issued by the Authority, and highlighting any divergence between the Bank's governance practices and those specified in the Manual, along with addressing these deviations (the Bank's evaluation of its implementation of governance principles).