No. 10/1/9887
Date: 30/6/2024

Instructions for Classifying Credit Exposures and Calculating Impairment Provisions Against Them No. (8/ 2024) Within the framework of the Central Bank of Jordan's continuous endeavor to keep pace with the implementation of the best international banking practices in line with the banking core principles for effective banking supervision issued by Basel Committee on Banking Supervision, it is decided to issue these instructions, which will be effective starting from 1/1/2025. Governor, Dr. Adel Sharkas.

Article ………………………………………………………………………..………..… Page No.
Introduction …………………………………………………………………………….………… (3)
Article (1): Attribution …………………………………………………………………………… (3)
Article (2): Scope of Application………………………………………………………………… (3)
Article (3): Classification of Credit Exposures ………………………………...……….………... (4)
Article (4): Modification of Contractual Terms with the Clients ………………………..……….. (7)
Article (5): Terms and Conditions for Transfers Between Credit Exposure Rating Categories and
Probationary Periods ……………………………………………………………………………… (8)
Article (6): Calculation of Impairment Provisions ………………………………….……………. (10)
Article (7): Provisions for Excluding Credit Exposures from the Statement of Financial Position (12)
Article (8): The Board of Directors and Executive Management's Responsibility ……………… (13)
Article (9): General Provisions ………………………………………………………………….. (15)
CONTENTS

Introduction:

• These instructions aim to define a framework for classifying banks' credit exposures and hedging
  credit risks in line with the standards issued by Basel Committee and international best practices.
• These instructions complement the requirements of the applicable accounting standards regarding
  classifying credit exposures and hedging any expected credit losses, and enhance consistency in the accounting principles followed in determining the levels of high- risk and non-performing credit exposures in the banks operating in the kingdom for prudential purposes (Prudential Requirements).
• The bank's board of directors must adopt a credit risk management policy that defines the
  acceptable levels of credit risk, and the executive management shall manage the bank's activities in accordance with that policy, as well as continuously monitor credit risk levels and trends and take measures to effectively manage credit risk, including building provisions against high- risk credit exposures.
  Article (1): Attribution
  These instructions are called (Instructions for Classifying Credit Exposures and Calculating Impairment Provisions) and are issued in accordance with the provisions of Articles (32/e), (42/a/2 and 3), (61) and (99/b) of the Banking Law No. 28 of 2000 and its amendments.
  Article (2): Scope of Application
  a. These instructions apply to all banks operating in the Hashemite Kingdom of Jordan, branches of Jordanian banks and banking subsidiaries operating outside the Kingdom, and it is the responsibility of the bank's board of directors to adopt the necessary policies and procedures to ensure compliance with the requirements of these instructions. b. The instructions of the countries hosting the presence of Jordanian banks abroad must be applied if they are more stringent than the requirements of these instructions, provided that the bank is committed to conducting a Mapping between the requirements of these instructions and the requirements of the host authority's instructions.
  c. For the purposes of applying these instructions, credit exposures include all types of direct credit
  facilities, debt instruments, interest and commissions recorded within on- balance sheet assets, and off- balance sheet items that include the bank's obligation to pay on behalf of the client.

Article (3): Classification of Credit Exposures
a. For the purposes of these instructions, credit exposures are categorized into the following categories:

1. Risk- acceptable (active) credit exposures are characterized by evidence of the strength of
   the client's current and future financial position based on a credit analysis showing that there are sufficient expected cash flows to cover the client's obligations according to the contractual terms agreed upon, and that the client regularly pays these liabilities at their due dates.
2. Watch list credit exposures (active) are characterized by any of the following:
   2.1 Credit exposures that have been categorized within the second stage according to the
   requirements of the instructions for applying IFRS 9 (13/ 2018), unless any of the provisions of classification within the category of non- performing credit exposures apply to them according to the requirements of these instructions.
   2.2 Having past dues for a period equal to or more than (30) days and not exceeding (89)
   days.
   2.3 Current and demand accounts exposed for a period equal to or greater than (30) days and
   not exceeding (89) days, and the period is calculated from the date the account had been overdrawn.
   2.4 Exceeding the balance of direct facilities the granted limits (not specified in a settlement
   schedule) by more than (10%) of that limit continuously for a period equal to or greater than
   (30) days and not exceeding (89) days, and the period is calculated from the date the limit begins to be exceeded by that percentage.
   2.5 The account that has been restructured as a result of the client facing financial difficulties
   that prevent his/ her ability to fulfill his/ her obligations by the due dates according to the contractual terms agreed upon. The bank must conduct the necessary assessment of the client's credit status to ensure that the account does not fall under the classification of non-performing exposures, even in the case where no dues are owed by the client on the date of the restructuring.
   2.6 Evidence of a deterioration in the client's financial condition that affects his/ her ability to
   continue to pay his/ her obligations as they fall due according to the contractual terms agreed upon at the time of granting.
   2.7 The applicability of any of the qualitative indicators for Stage 2 exposures set out in the
   instructions for applying IFRS 9 No. (13/ 2018).
3. Non- performing credit exposures are characterized by any of the following:
   3.1 Credit exposures that have been categorized within the third stage according to the
   requirements of the instructions for applying IFRS (9) No. (13/ 2018).
   3.2 Unpaid dues for a period equal to or greater than (90) days.

3.3 Current and demand accounts exposed for a period equal to or greater than (90) days,
which is calculated from the start date of the overdrawn of account.
3.4 The balance of direct facilities exceeding the granted ceiling (not specified in a settlement
schedule) by more than (10%) of the value of that ceiling and continuously for a period equal
to or more than (90) days, and the period is calculated from the date the ceiling begins to be exceeded by that percentage.
3.5 The account that is restructured during the probationary period as a result of the client
facing financial difficulties that prevent his/ her ability to fulfill his/ her obligations by the due dates according to the existing contractual terms.
3.6 Credit exposures belonging to a client who has declared insolvency or a company that has
been placed in voluntary or compulsory liquidation.
3.7 The remaining portion of non- performing credit exposures in which a settlement has been
made with the client as a result of his/ her financial difficulties, including the bank's acquisition of guarantees for the purpose of paying a portion of them, where such action is considered as rescheduling. This remaining portion is subject to the transfer provisions set forth in Article (5) for the purpose of transferring it to the watch list category.
3.8 Credit exposures for which interest or commissions have been suspended.
3.9 Evidence of the client's financial condition deterioration or the failure of any of his/ her
projects on which he/ she mainly relies to pay his/ her obligations or the issuance of judicial rulings against him/ her that affect the adequacy of available payment sources to collect the full value of the credit exposures belonging to them.
3.10 Applicability of any of the qualitative indicators for Stage 3 exposures set out in the
instructions for applying IFRS 9 No. (13/ 2018). b. Non- performing Credit Exposures are divided into (3) categories according to the criteria shown below:

Credit Exposures Category Criteria

1. Substandard The possibility of the bank losing part of the client's
   existing credit exposures or the existence of overdue payments for a period equal to or greater than 90 days and not exceeding 180 days.
2. Doubtful The possibility of the bank losing a significant
   portion of the client's existing credit exposures or the existence of receivables/ non- payment for a period of more than 180 days and not exceeding 365 days.
3. Loss The possibility of the bank losing most of the
   client's existing credit exposures or having receivables/ non- payments for a period of more than 365 days.

c. The following shall be taken into consideration when categorizing Credit Exposures within the
categories set in this Article:

1. In the event that one of the client's accounts falls under the non- performing category, all
   credit exposures (all accounts including off- balance sheet accounts that include an obligation for the bank to pay on behalf of the client) of the client must be classified under the non￾performing category, with the exception of the client's accounts related to projects that have separate accounting and are guaranteed by transfers of rights or specific payment sources and sufficient cash flows and not connected with other accounts of the client, provided that the necessary evaluation and documentation is carried out by the bank.
2. In the event that one of the client's accounts is restructured as a result of financial difficulties
   as defined in Article (4) of these instructions, only the account that has been restructured shall be categorized- as a minimum- under the monitored category, provided that the client's other accounts are eligible to remain in the acceptable risk category.
3. In the event that a client whose accounts have been classified as non- performing is part of
   a connected persons group, the bank must conduct the necessary assessment of all connected persons’ accounts and conduct the necessary documentation regarding them to confirm that they are not affected by the credit exposures that have been classified as non- performing, otherwise those accounts will be classified as non- performing.
4. Indirect credit exposures to a client (recorded off- balance sheet and include an obligation
   for the bank to pay on behalf of the client) are classified according to the qualitative indicators set in the instructions for applying IFRS 9 No. (13/ 2018) if there are no direct credit exposures with the client.
5. The bank must adopt a mechanism to monitor the utilized balances of the overdraft ceilings
   granted to clients (ceilings that are granted to finance working capital and do not include a specific timetable for withdrawal and repayment) taking into account the setting of quantitative and qualitative criteria for categorizing these ceilings that are more stringent than the criteria set forth in this article, and that these criteria should include determining the expected turnover rates according to the client's activity and the periods of inactivity of overdraft (no interest service), provided that they are at a minimum as follows:
   Overdraft dormancy period Classification category Watch list Equal to or more than (30) days but not more than (89) days Inactive /Substandard Equal to or more than (90) days and not more than (180) days More than (90) days and not more than (180) days Inactive /Doubtful More than (365) days Non- performing /Loss

Article (4): Modification of Contractual Terms with the clients
a. The aim of making any amendment to the contractual terms agreed upon with the client as a result of his/ her financial difficulties is to enable the client to fulfill his/ her obligations on their due dates, taking into consideration the reasons that led to his/ her financial difficulties. Therefore, the amendment process is based on an in- depth credit study of the expected cash flows from the client's activity on which he/ she relies as a source of payment and shows the extent of the client's ability to provide these flows on the due dates before proceeding to amend the contractual terms. If the bank has doubt that the cash flows will be insufficient to pay the full obligations of the client, it shall conduct the necessary hedging against any possible losses. b. For the purposes of these instructions, a restructuring is defined as an amendment to the contractual terms agreed upon with the client as a result of facing financial difficulties while these exposures are categorized within the category of working credit exposures. Financial difficulties are defined as, but not limited to, the following:
1. The existence of unpaid amounts owed by the client for a period equal to or greater than
(30) days on the date of the restructuring, with indications that the expected cash flows are insufficient to pay his/ her existing obligations with the bank in accordance with the existing contractual terms.
2. A significant decline in cash flows that limits the client's ability to pay his/ her obligations
according to the existing contractual terms.
c. For the purposes of these instructions, a rescheduling is defined as an amendment to the
contractual terms agreed with the client at a time when these exposures have been classified as non- performing, and the rescheduled exposures will remain classified as non- performing until the conditions set forth in Article (5) of these Instructions are met. d. The process for amending the contractual terms referred to in (B) and (C) above shall include the following:
1. Reorganizing some or all of the client's obligations under a new contract or contracts.
2. Adjusting the value of installments or extending the term of the exposure.
3. Granting or extending a grace period.
4. Capitalizing payable interest or commissions.
5. Postponing the due date of any payments, interest or commission, whether due or to be due
in the future. e. When the bank conducts a restructuring due to financial difficulties or a rescheduling of credit exposures, it must take all possible measures to facilitate the client's financial burden in such a way as to enable him/ her to meet his/ her obligations on the due dates and without affecting the to the bank's rights.

f. It is not permitted to grant a grace period of more than (18) months in the case of restructuring due to financial difficulties and (12) months in the case of rescheduling, even if the period includes the client's commitment to pay interest, except for bank syndicated loans and with the prior approval of the Central Bank of Jordan. g. The repayment period of restructured or rescheduled credit exposures may not exceed (10) years for the corporate portfolio (except for credit exposures whose original contract period exceeds (10) years). As for the retail portfolio, the requirements of Central Bank Circular No. (27/1/5780) dated 22/3/2023 shall be adhered to in this regard. h. Its permissible to grant new credit exposures that not exceeding (25%) of the balance of existing credit exposures for a client whose exposures or any of them, have been classified under the watch list credit exposures category if the bank is convinced based on an in- depth study of expected cash flows and based on documented evidence, that the client's financial position is likely to improve. Provided that this increase shall not be used to pay off existing, credit exposures held by the client or any of the connected persons with him/ her at a bank, but is used exclusively for the purpose of financing the client's activities and enabling him/ her to rectify the status of his/ her existing exposures.
i. It’s not permissible to settle credit exposures to which the provisions of classification as non￾performing exposures apply, or any part thereof by arranging to grant credit facilities from the
bank to any of the connected person with the client or having a significant interest with him/ her or his/ her relatives up to the third degree. j. No increase in existing credit exposures may be granted to any client whose exposures have been classified as non- performing in accordance with the requirements of these instructions.
Article (5): Terms and Conditions for Transfers between Credit Exposure
Rating Categories and Probationary Periods a. The classification category of credit exposures that have been restructured as a result of financial difficulties or a rescheduling procedure may not be modified to a better category unless the conditions set forth in this Article are met. b. Credit exposures categorized as watch list that have been restructured as a result of financial difficulties may be reclassified to an acceptable risk category if all of the following conditions are met:

1. A probationary period of not less than (12) months, and the period shall start from the date
   the first payment is due from the client according to the new contractual terms.
2. The client's commitment to pay the installments on their due dates according to the new
   contractual terms.
3. The amount of payments paid during the probationary period shall not be less than (5%) of
   the balance of the client's direct credit exposures existing on the date of the restructuring

procedure due to financial difficulties, plus interest and commissions incurred on these exposures during the probationary period.
4. In case the bank grants new credit exposures to the client upon the restructuring procedure
due to financial difficulties or during the probationary period (in addition to the existing balance on the date of the restructuring procedure due to financial difficulties), at least (15%) of the value of this increase must be repaid.
5. Excluded from clause (3) above the loans for individuals that are paid in equal monthly
installments over the lifespan of the loan, so that the client's commitment to pay the payments on their due dates is monitored during the probation period without requiring a specific percentage to be paid.
6. Conducting the necessary assessment to verify that the client's credit status has improved and
that none of the provisions for categorizing credit exposures within the watch list category set forth in Article (3/a/2) of these instructions apply.
c. Credit exposures that are classified in the watch list category and have not been restructured as
a result of financial difficulties may be reclassified to an acceptable risk category if it is verified that the credit status of these exposures has improved and the reasons that led to their classification in the watch list category set forth in Article (3/a/2) of these instructions are no longer applicable, without the need to undergo a probationary period. d. If the credit exposures are subjected to the probationary period specified in clause (b) above meet the provisions for classification in the non- performing category specified in Article (3/a/3) during the probationary period, they must be classified in the non- performing category, and the classification category may be modified only after meeting the conditions listed below according to the status quo at the time. e. Credit exposures classified in the non- performing category that have been rescheduled or to which the provisions of classification as non- performing debt have been applied in light of restructuring as a result of financial difficulties during the test period may be reclassified to the watch list category if all of the following conditions are met:

1. A probationary period of at least (6) months, and the period starts from the date the first
   payment is due from the client according to the new contractual terms.
2. The client's commitment to pay the installments on their due dates according to the new
   contractual terms during the probationary period.
3. The value of the paid installments shall not be less than (5%) of the balance of the client's
   direct credit exposures existing on the date of the restructuring procedure as a result of financial difficulties or rescheduling, plus the interest and commissions incurred on these exposures during the probationary period.
4. Excluded from clause (3) above are residential loans for individuals that are paid in equal
   monthly payments over the lifespan of the loan, so that the client's commitment to pay the

installments on their due dates is monitored during the probationary period without requiring the payment of a specific percentage.
5. Conducting the necessary assessment to verify that the client's credit status has improved and
that none of the provisions of the classification of credit exposures within the non- performing category set forth in Article (3.A.3) of these instructions apply. f. If the client owes dues for a period equal to or exceed (90) days during the probationary period indicated in clause (E.1) above, the above probationary period (6 months) shall be recalculated to start from the date of payment of those dues, and the date of default on the basis of which those exposures were classified as non- performing for the purpose of calculating the impairment provisions according to Article (6) of these instructions shall be taken into account. g. If the client completes the probationary period specified in clause (E.1) of this Article, the indebtedness shall be transferred to the watch list category and subjected to another probationary period within this category of not less than (6) months. h. Credit exposures that have been categorized as non- performing and have not been scheduled may be reclassified to watch list if the following conditions apply: -
1. A probationary period of not less than (3) months, and the period starts from the date the
client starts paying his/ her dues.
2. Conducting the necessary assessment to verify that the client's credit status has improved and
that none of the provisions of the classification of credit exposures within the non- performing category specified in Article (3.A.3) of these instructions apply.
i. If the client owes dues for a period equal to or exceed (90) days during the probationary period
specified in Article (h.1) above, the above probationary period (3 months) shall be recalculated to start from the date of payment of such dues.
Article (6): Calculation of Impairment Provisions
a. For the purpose of calculating the impairment provision for direct credit exposures, the value of eligible guarantees shown in Annex 1 shall be taken into account by subtracting it from the principal of the credit exposures according to the mechanism shown in the clauses below. b. An impairment provision covering the full principal amount of direct credit exposures categorized as non- performing and not covered by any of the eligible guarantees listed in the
annex mentioned above shall be prepared gradually and for a maximum of one year from the
default date as follows:
1. (25%) when the definition of substandard credit exposures applies.
2. (50%) When the definition of doubtful credit exposures applies.
3. (100%) when the definition of impaired credit exposures applies.

c. A provision for impairment covering the entire principal amount of direct credit exposures
classified as non- performing and covered by eligible in- kind guarantee is gradually prepared as follows:

1. If the value of the guarantee is equal to or greater than the principal of the credit exposures,
   an impairment provision covering the full value of the credit exposures shall be prepared over (5) years at the rate of (20%) of the principal of those exposures per year, and the year shall be calculated from the date of default.
2. If the value of the guarantee is less than the principal of the credit exposures, an impairment
   provision covering the entire uncovered portion in the first year or (20%) of the principal, whichever is greater, shall be prepared, and the remaining amount is amortized over the subsequent four years equally, and the year is calculated from the date of default. d. An impairment provision covering the entire principal of direct credit exposures classified as non- performing and covered by an eligible financial guarantee shall be made for a maximum of one year from the date of default. e. An impairment provision shall be made to cover the entire principal of direct credit exposures classified as non- performing that is guaranteed by the Jordan Loan Guarantee Corporation (JLGC) starting from the end of the third year of the default date gradually and equally over the years from the end of the third year until the end of the fifth year, with the commitment to make a full provision for the portion that is not guaranteed by the JLGC or not matched by any of the eligible guarantees shown in Annex No. (1) as per the requirements of these instructions. f. An impairment provision of (5%) of the balance of direct credit exposures classified under the watch list category is prepared after excluding the portion covered by the eligible guarantees shown in Annex No. (1) as well as excluding the portion guaranteed by the Jordan Loan Guarantee Company. g. The provision for impairment on off- balance sheet credit exposures, which include the bank's obligation to pay on behalf of the client, is calculated using the same methodology adopted by the bank for the purpose of calculating credit losses against such exposures as per the requirements stipulated in the instructions for applying IFRS 9 No. (13/ 2018). h. Credit exposures on the Government of Jordan and its guarantees are treated without credit loss, in accordance with (Item 3/3/e/4) of the instructions for applying IFRS (9) No. (13/ 2018).
   i. Interest and commissions on credit exposures shall be suspended as soon as they are classified
   as non- performing exposures, and shall not be returned to revenues until the necessary conditions for transferring these exposures to the watch list category are met, as set forth in Article (5) of these instructions. J. Credit exposures that have been rescheduled or classified as non- performing exposures in light of their restructuring as a result of financial difficulties during the probationary period shall be subjected to the provisions for calculating the impairment provision set forth in this Article (i.e. continuing to allocate the provision against them and suspending interest and commissions after

the rescheduling or restructuring). The provision made against them may not be released or the suspended interest and commissions returned to revenue or the date of discontinuation of payment modified until fulfilling the conditions necessary to transfer the classification of these exposures to the watch list category set forth in Article (5) of these instructions. k. Credit exposures are classified and impairment provisions are calculated on a quarterly basis in accordance with the requirements of these instructions, provided that the expected credit loss provisions on credit exposures calculated in accordance with the requirements stipulated in the instructions for applying IFRS 9 No. (13/ 2018) are allocated to the bank's financial statements (as a minimum) along with any additional impairment provision required by these instructions. For the purpose of determining the additional provisions for both credit exposures classified as non￾performing and watch list, the following procedures are performed:

1. Comparing the results of the total provisions made against credit exposures classified as
   Stage 2 in accordance with the requirements of the instructions for applying the International Financial Reporting Standard (IFRS) (9) No. (13/ 2018) with the total provisions made against credit exposures classified as watch list in accordance with the requirements of these instructions and allocating any additional provisions required by these instructions.
2. Comparing the results of the total provisions made against credit exposures classified as
   Stage 3 in accordance with the requirements of the instructions for applying IFRS (9) No. (13/
   2018) with the total provisions made against credit exposures classified as non- performing in
   accordance with the requirements of these instructions and allocating any additional provisions required by these instructions.
   L. Wherever there is a need to hedge any potential deterioration in the quality of any of the credit
   exposures, the bank must provide the necessary provisions for this purpose, and the impairment allowance ratios set forth in this article of these instructions represent the minimum limits that banks must maintain.
   Article (7): Provisions for Excluding Credit Exposures from the Statement of
   Financial Position a. The bank must establish policies and procedures for excluding direct credit exposures from the statement of financial position with adherence to the following:
3. Credit exposures are excluded from the Bank's statement of financial position by a decision
   issued by the bank's board of directors.
4. The credit exposures that have been excluded from the statement of financial position shall
   be recorded in a special register under the control of an independent entity in the bank, and all documents and supporting papers related to them shall be saved to ensure that the bank's right to claim these debts is preserved in accordance with the legal procedures to be followed.

b. The credit exposures that have been excluded from the statement of financial position are subjected to a periodic review by an independent entity determined by the bank's board of directors at least once a year, in which the steps taken to collect the bank's rights are evaluated, and any weaknesses that may have led to the bank's inability to collect its rights are reviewed and the necessary measures are taken to address them. The review report and recommendations are submitted to the Audit Committee emanating from the bank's board of directors and a copy to the Central Bank of Jordan attached to the semi- annual financial statements.
c. In no case may any of the parties that were or still have a relationship with the bank be exempted
from any part of the obligations incurred, and the necessary measures must be taken to claim any dues incurred on the related parties to the bank. A report must be submitted periodically by the Internal Audit Department to the Audit Committee of the bank's board of directors indicating the size of the dues incurred on the related parties to the bank and recommendations regarding them, and a copy of the report must be provided to the Central Bank of Jordan. d. The bank must exclude credit exposures covered by (100%) impairment provisions from the statement of financial position within a maximum of (5) years from the date of classification of these exposures within the category of non- performing/ impaired credit exposures, except for any justified cases with a prior approval of the bank's board of directors, provided that a detailed report is prepared for the exempted exposures and the reasons for not excluding them from the statement of financial position. Moreover, credit exposures may not be excluded from the statement of financial position before two years have passed since their classification within the category of non- performing/ impaired credit exposures.
Article (8): The Board of Directors and Executive Management's Responsibility
a. The bank's board of directors must adopt a strategy that outlines the bank's approach and procedures for the early identification of credit exposures that are likely to be classified or have been classified as non- performing as well as the mechanisms for monitoring their existing and expected levels and determining the practical plans that will be followed to reduce the amount of these exposures within realistic periods of time. b. The bank's board of directors must ensure that the executive management develops the necessary procedures to implement the strategy for dealing with credit exposures that are likely to be classified or have been classified as non- performing, and that it includes, at a minimum, the following:

1. Identifying the various options available to deal with these exposures, such as restructuring,
   rescheduling, negotiating and settling with clients, or legal procedures .... etc.
2. Establishing clear criteria to ensure periodic evaluation of the feasibility of these options.
3. Establishing quantitative target indicators within acceptable time periods to reduce the size
   of these exposures.
   c. The bank's board of directors must adopt performance indicators to monitor the effectiveness of
   the above mentioned strategy through the bank's risk management department, provided that the

above performance indicators include qualitative and quantitative measures that enable the board to assess the quality of the treatment measures taken by the executive management in this regard, and to take corrective measures in case the strategy turns out to be ineffective in achieving the targeted indicators. d. The board of directors must ensure that the necessary resources are available to implement the above strategy, including ensuring the adequacy of specialized human resources and systems, and defining and documenting the roles, responsibilities, administrative subordination and incentives to support the implementation of this strategy. e. The bank's board of directors should ensure that the entity responsible for implementing the mentioned strategy is independent from the business and grants units, to avoid the possibility of a conflict of interest. f. The bank's board of directors must ensure that there is an integrated system of control and oversight (including automated rating systems) of the bank's compliance with the requirements of these instructions as a minimum. g. The bank's board of directors shall ensure that the bank's credit policy includes the following:
1. The bank's compliance with the requirements of these instructions as a minimum.
2. The existence of effective hedging mechanisms for credit risk management covering all the
bank's activities, and reviewing them periodically and whenever necessary to ensure that any weaknesses in the credit decision- making mechanisms that led to the bank incurring losses are addressed.
3. Determination of the classification categories in the bank's internal classification system that
correspond to the classification categories of credit exposures specified in Article (3) of these instructions.
4. The necessary supervisory procedures to ensure that the bank's presence outside Jordan is
committed to applying the requirements of these instructions as a minimum, and to ensure that periodic reviews are conducted to ensure continuous compliance, as well as to document the bank's implementation of these procedures periodically, and provide the Central Bank of Jordan with an annual report that includes the results of these procedures attached to the semi- annual financial statements.
5. The necessary supervisory procedures to ensure the determination of the magnitude of credit
risk and the hedging mechanism at any of the bank's subsidiaries that are not covered by the scope of application specified under Article (2.a) of these instructions. h. The bank's board of directors shall adopt procedures for the periodic evaluation of credit risk mitigators represented in guarantees pledged in favor of the bank against credit exposures regardless of their classification, including procedures for evaluating real estate guarantees and criteria for accreditation of external real estate appraisers, subject to adherence to the following:

1. The valuation entity shall issue reports indicating the extent of the bank's ability to monetize
any of the guarantees and the expected period for its disposal within the estimated value of the guarantee approved by the valuation entity.
2. The real estate guarantee must be evaluated by at least one real estate expert or by the bank's
real estate expert if the value of the property guaranteeing the credit exposures does not exceed (100) thousand JODs.
3. Real estate guarantee that exceeds (100) thousand JOD shall be evaluated by at least two
external real estate appraisers, and the average of these estimates shall be adopted, and in case there is a discrepancy in the estimates of more than (20%), the lower real estate estimate shall be adopted.
4. The real estate guarantee must be reassessed within six months from the date of application of
the provisions of the classification within the non- performing category to the credit exposures guaranteed by these properties.
i. The bank must classify credit exposures and calculate impairment provisions in accordance with
the requirements of these instructions on a quarterly basis at a minimum, and reports related to these results must be submitted to the Risk Management Committee of the bank's board of directors indicating the changes in the classification of credit exposures, the size of restructured and rescheduled facilities and the effectiveness of credit risk reduction measures, including the measures taken to hedge these risks, provided that the committee submits a report to the bank's board of directors immediately upon identifying any material changes affecting the bank's financial position to take the necessary corrective measures. The committee shall provide the Central Bank with a copy of the report within a period of no more than 10 working days as of the date of the report.
Article (9): General Provisions
a. Banks are prohibited from granting direct facilities that are not defined by a clear repayment
schedule, with the exception of the overdraft ceilings granted for the purpose of financing working
capital to meet the client's short- term needs and for legal persons only, provided that a credit study is prepared upon each renewal of the ceiling. Such study shall determine the client's actual need for this type of ceiling based on recent financial data and taking into account the ceilings granted to the client for this purpose from other banks. Any existing ceilings that violate this provision must be corrected by the due date of the ceiling. b. Any cash collections from non- performing credit exposures shall be used to repay the principal of the credit exposures first, and after full satisfaction of the principal of the credit exposures, subsequent cash collections shall be credited as accrued interest receivable.
c. Guarantees pledged in favor of the bank against any of the credit exposures does not affect the
classification of the credit exposures, regardless of the quality and value of the guarantee. d. In the event that the Central Bank of Jordan identifies deficiencies in the bank's procedures in classifying credit exposures and making provisions against them in accordance with the

requirements of these instructions, or poor or inadequate control and monitoring procedures, or evidence of practices aimed at avoiding the classification of credit exposures and making provisions against them and addressing their risks in a timely manner, the Central Bank will consider the following intervention options:
1. Issuing special orders that include modifying the classification of any of the bank's credit
exposures and making provisions for impairment at rates determined by the Central Bank of Jordan.
2. Impose higher requirements for regulatory capital adequacy ratios.
3. Amending the bank's rating with the Central Bank of Jordan in accordance with the
applicable rating system.
4. Appointing a consultant to assess any of the aspects specified by the Central Bank of Jordan.
5. Any other measures that the Central Bank of Jordan deems appropriate.
e. The bank shall provide the Central Bank of Jordan with reports and data related to these instructions in accordance with the forms, periodicity and dates specified by the Central Bank. f. The reference authority to which the regional director of the foreign banks' branches operating in the bank is subordinate shall carry out the duties and responsibilities assigned to the bank's board of directors or its committees stipulated in these instructions. g. For the purposes of these instructions, Islamic banks shall apply the Financial Accounting Standards Implementation Instructions issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) dated 5/7/2020, wherever reference is made in the body of these instructions to the requirements of the Instructions for Applying IFRS 9 No. (13/ 2018). h. The following shall be repealed as of 1/1/2025:
1. Instructions for classifying credit facilities and calculating the impairment provisions and
reserve for general banking risks No. (47/ 2009) dated December 10, 2009.
2. Circular No. (10/1/11084) dated August 27, 2018.

Annex No. 1
Eligible guarantees a. In- kind Guarantees:
1. (80%) of the estimated value of the property mortgaged to the bank in the first degree- and
subsequent degrees are accepted if the property is mortgaged in favor of the bank in the first degree- or the value of the mortgage deed plus interest on the value of the mortgage deed, whichever is less, and for the purposes of these instructions, shares of real estate and real estate in joint possession are not taken into consideration.
2. (50%) of the estimated value of cars and vehicles mortgaged by registration with the official
departments exclusively, or the value of the mortgage, whichever is less. b. Financial guarantees:
1. (100%) of the value of cash guarantees.
2. (100%) of the value of guarantees issued by banks operating in the Kingdom or foreign banks
whose credit rating is not less than Investment Grade issued by well- known rating agencies.
3. (85%) of the market value of bonds.
4. (85%) for stocks listed in the main index of the financial market.
5. (75%) of the market value of stocks that are not listed in the main index of the financial
market, and securities that are not listed on the financial market are not considered for the purposes of these instructions.