Regulatory Alerts2021-10-05
Added · Updated
Circular on Islamic Banks Regarding Investment Risk Fund and Profit Smoothing Reserve
The Central Bank of Jordan mandates that Islamic banks distribute the balance of the abolished Investment Risk Fund by setting aside provisions against specific receivables and non-performing financings as of April 30, 2019. Effective May 1, 2019, provisions against assets financed by investment account holders must be charged against the common investment pool's profits, while those against bank-funded assets are charged to the income statement. Banks must retain any fund surplus as an expected credit loss provision and submit a modified policy regulating relationships with investment account holders, including profit smoothing reserve mechanisms, within two months. The circular repeals previous provisions related to the Investment Risk Fund from various existing instructions and circulars.