Palestine Monetary Authority

PALESTINE MONETARY AUTHORITY

Instructions No. (4) of 2021

Regarding the Granting of Loans and Financing to Related Parties

Based on the provisions of Decision No. (132) of 2011 on the Licensing and Supervision of Specialized Lending Institutions, particularly Article (21) thereof, In accordance with the powers delegated to us, And in pursuit of the public interest, We have issued the following Instructions:

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Article (1)

Definitions

The words and expressions used in these Instructions shall have the meanings specified below, unless the context indicates otherwise:

Institution: A specialized lending institution as defined in Decision No. (132) of 2011 on the Licensing and Supervision of Specialized Lending Institutions and its amendments.

Significant Share: A share equivalent to 5% of the Institution's capital or voting power.

Related Parties: A legal or natural person who is connected to the Institution or to any of their first- or second-degree relatives through any of the following relationships with the Institution:

1. The Institution's external auditor and its subsidiary companies.
2. Advisors to the Institution.
3. Shareholders holding significant shares in the Institution's capital.
4. Companies or entities controlling the Institution.
5. Subsidiary companies of the Institution or its senior management.
6. Members of the Institution's Board of Directors and its subsidiary companies.
7. The Chief Executive Officer/General Manager of the Institution and their deputies and assistants.
8. The head of key departments within the Institution.

First-Degree Relatives: Father, mother, son, and daughter. Relatives of one spouse in the same degree and kinship are considered relatives of the other spouse.

Second-Degree Relatives: Grandfather, grandmother, brothers, sisters, and grandchildren. Relatives of one spouse in the same degree and kinship are considered relatives of the other spouse.

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Article (2)

Objective and Scope of Application

1. These Instructions aim to regulate the granting of loans and financing to related parties at specialized lending institutions.
2. The provisions of these Instructions apply to all specialized lending institutions licensed by the Palestine Monetary Authority.

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Article (3)

Granting Loans and Financing to Related Parties

An Institution wishing to grant loans and financing to related parties or on their guarantee shall comply with the following:

1. Adopt a policy and operational procedures from the Board of Directors regarding the granting of loans and financing to related parties or on their guarantee, taking into account the Institution's developmental objectives and social mission, subject to obtaining prior written approval from the Palestine Monetary Authority.

2. The loan or financing to be granted to a related party or on their guarantee must be consistent with the Institution's approved policy.

3. Obtain prior written approval from the Palestine Monetary Authority when intending to grant loans, financing, or guarantees to any of the following:

   a. The Chief Executive Officer/General Manager of the Institution and their deputies and assistants. b. The Chairman and members of the Institution's Board of Directors.

4. Related parties shall not participate in the discussion or decision-making regarding their own credit applications.

5. The portfolio of loans and financing granted to related parties or on their guarantee shall not exceed 5% of the Institution's total equity.

6. Obtain prior written approval from the Institution's Board of Directors and the Palestine Monetary Authority when intending to restructure, reschedule, or write off loans and financing to related parties or on their guarantee, even after excluding their classification as related parties.

7. Provide an automated system that enables the classification of related parties in compliance with the requirements of these Instructions.

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Article (4)

Disclosure Requirements in Periodic Reports

The Institution must disclose loans and financing granted to related parties or on their guarantee in each of the periodic quarterly reports and in the interim and final financial statements, in accordance with the prevailing Instructions.

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Article (5)

Repeal

All provisions conflicting with the terms of these Instructions are hereby repealed.

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Article (6)

Penalties

Any person who violates the provisions of these Instructions shall be penalized in accordance with the provisions of Decision No. (132) of 2011 on the Licensing and Supervision of Specialized Lending Institutions.

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Article (7)

Implementation and Enforcement

All competent authorities shall implement the provisions of these Instructions, each within their respective jurisdiction, and they shall apply from the date of their issuance.

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Issued in Ramallah on 2021/06/10 AD

Dr. Firas Malham
Governor

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Note:
At the bottom of each page, contact information appears:

• Ramallah & Al-Bireh - Palestine:
  Ramallah & Al-Bireh Governorate - Palestine P.O. Box 452 info@pma.ps | Fax: +970 2 2415310 | Fax | Tel: +970 2 2415251 | Phone

• Gaza - Palestine:
  Gaza - Palestine P.O. Box 4026
  Fax: +970 8 2844487 | Fax | Tel: +970 8 2825713 | Phone

www.pma.ps