Instructions No. 3 of 2012 Regarding Working Capital and Cash Guarantees

Palestine Monetary Authority

Instructions No. (2012/03)

To all exchange companies and money changers operating in Palestine

Date: Tuesday, September 25, 2012

Subject: Working Capital and Cash Guarantees

Based on the provisions of Presidential Decree No. (13) of the year 2008 regarding the licensing and supervision system for the profession of money changing, the following instructions organize working capital and cash guarantees:

1. Capital

a. Paid-in Capital:

1. Paid-in capital is defined as: (Net working capital plus deposits and guarantees with the Monetary Authority, fixed assets, and reasonable intangible assets).
2. The minimum paid-in capital for exchange companies shall be as specified in Instructions No. (1) of 2012.
3. The paid-in capital stated in the Articles of Association and the approved Internal Regulations by the Monetary Authority must equal the definition of paid-in capital in item (a).

b. Working Capital for Exchange Companies:

1. Net working capital is defined as: Current assets (including cash, purchased checks in various currencies, unmanufactured precious metals, balances with banks, and credit balances with correspondents in various currencies) minus liabilities (balances of existing facilities obtained by the changer from banks and correspondent balances).
2. Net working capital must not be less than 75% of paid-in capital.
3. The value of unmanufactured precious metals must not exceed 20% of net working capital.
4. Fixed assets and intangible assets are reduced by 15% from paid-in capital.
5. The changer must comply with the following regarding fixed assets: a. The fixed asset must be registered under the commercial name of the changer. b. The asset must be used for money changing purposes, not for investment purposes. c. Assets must be recorded and depreciated according to accounting standards. d. They must be evidenced in audited financial statements.
6. Personal withdrawals by partners in exchange companies (ordinary and limited) must not exceed current realized profits during the period. Personal withdrawals are prohibited if current losses are realized, accumulated losses exist, or if there is non-compliance with the minimum capital requirements specified in our Instructions No. (1) of 2012.

c. Working Capital for Individual Changers:

1. Net working capital for the individual is as referred to in item No. (1/b) of these instructions.

2. Paid-in capital is defined as: (Net working capital plus deposits and guarantees with the Monetary Authority).

3. The value of unmanufactured precious metals must not exceed 20% of net working capital.

4. Fixed assets and intangible assets are not reduced as part of paid-in capital.

5. Personal withdrawals by the individual changer must not exceed current realized profits during the period. Personal withdrawals are prohibited if current losses are realized or accumulated losses exist.

6. Bank Guarantee / Cash Deposit / Cash Guarantee:

a. Bank Guarantee / Cash Deposit: The changer must provide a bank guarantee to the Monetary Authority or a cash deposit in an account held with the Monetary Authority. The guarantee period expires one month after the license period ends, unless the license is renewed. The amounts are as follows:

1. Exchange Companies

Value of Guarantee/Cash Deposit	Legal Form
5,000	Ordinary, Public, Limited Ordinary Company
10,000	Private Joint Stock Company
20,000	Public Joint Stock Company

In US Dollars.

2. Individual Changers

Value of Guarantee/Cash Deposit	Category
12% of Authorized Capital	Category One
7% of Authorized Capital	Category Two
5% of Authorized Capital	Category Three

b. The changer is committed to depositing a cash guarantee with the Monetary Authority upon licensing, as follows:

1. Within city limits:

Cash Guarantee	Legal Form
10,000 USD	Ordinary, Public, Limited Ordinary Company
25,000 USD	Private Joint Stock Company
50,000 USD	Public Joint Stock Company

2. Outside city limits:

Cash Guarantee	Legal Form
5,000 USD	Ordinary, Public, Limited Ordinary Company
15,000 USD	Private Joint Stock Company
25,000 USD	Public Joint Stock Company

c. Deposit of cash guarantee with the Monetary Authority for each branch, as follows:

Cash Guarantee	Legal Form
5,000 USD	Ordinary, Public, Limited Ordinary Company

Cash Guarantee	Legal Form
10,000 USD	Private Joint Stock Company
20,000 USD	Public Joint Stock Company

d. Deposit of cash guarantee with the Monetary Authority in the amount of 50,000 USD according to the requirements for issuing and accepting remittances outside Palestine.

e. The maximum total of bank guarantees, cash deposits, and cash guarantees held with the Monetary Authority for a changer whose legal form is a company (Ordinary Public, Limited Ordinary, Private Joint Stock), including cash guarantees for branch licenses and remittance operations, is 50,000 USD.

f. The maximum total of bank guarantees, cash deposits, and cash guarantees held with the Monetary Authority for a changer whose legal form is a company (Public Joint Stock), including cash guarantees for branch licenses and remittance operations, is 100,000 USD.

3. Rectification of Status: For the purpose of calculating existing fixed assets, all exchange companies must submit a detailed statement including fixed assets, asset value, purchase date, depreciation rates, and net book value, as well as intangible assets. The statement must be signed by the company, stamped, and signed and stamped by the auditor within one month of its date.

Compliance with these instructions begins from the date of their issuance, and anything conflicting with them is repealed.

Supervision and Inspection Department Palestine Monetary Authority

Ramallah - Al Bireh P.O.Box 452 - Tel.: 02-2409920 - Fax: 02-2409922 Gaza - P.O. Box 4026 - Tel.: 08-2825713 - Fax: 08-2844487 E-mail: info@pma.ps www.pma.ps

Ramallah - Al Bireh P.O.Box 452 - Tel.: 02-2409920 - Fax: 02-2409922 Gaza - P.O. Box 4026 - Tel.: 08-2825713 - Fax: 08-2844487 E-mail: info@pma.ps www.pma.ps