Instructions on Granting Foreign Currency Credit Facilities and Controls on Granting Credit Facilities to Persons Not Engaged in Activities within the Kingdom and/or for Financing Activities Outside the Kingdom No. (2/2021)

10/1/3758 AH / 3/3/2021 AD

Instructions on Granting Direct Foreign Currency Facilities and Controls on Granting Credit Facilities to Persons Not Engaged in Activities within the Kingdom and/or for Financing Activities Outside the Kingdom No. (2/2021)

In the context of the Central Bank's continued approach to follow up on the review of its issued instructions and circulars, and with the aim of framing the instructions and circulars regulating the granting of direct foreign currency facilities by banks and credit facilities to persons not engaged in activities within the Kingdom and/or for financing activities outside the Kingdom, and merging them into a single document, the amended instructions related to granting these facilities are attached herewith, which include further clarification of a number of requirements related to the aforementioned facilities.

These instructions shall take effect from their date, and the Bank is required to provide us with data related to the aforementioned instructions on a quarterly basis starting from the end of March 2021, according to the forms prepared for this purpose and attached to these instructions.

Please accept our highest regards,

The Governor Dr. Ziad Frieze

Central Bank of Jordan

Instructions on Granting Foreign Currency Credit Facilities and Controls on Granting Credit Facilities to Persons Not Engaged in Activities within the Kingdom and/or for Financing Activities Outside the Kingdom No. (2/2021)

First: Legal Basis These instructions shall be known as the "Instructions on Granting Foreign Currency Facilities and Controls on Granting Credit Facilities to Persons Not Engaged in Activities within the Kingdom and/or for Financing Activities Outside the Kingdom", and are issued pursuant to the provisions of Articles (4/b/6) and (44/a) of Central Bank Law No. (23) of 1971 and its amendments, and Article (99/b) of Banks Law No. (28) of 2000 and its amendments.

Second: Determinants for Granting Direct Foreign Currency Credit Facilities Banks are permitted, in accordance with sound banking standards and practices in lending, to grant direct foreign currency credit facilities (including syndicated loans and foreign currency credit facilities granted against foreign currency cash collateral) to finance the following activities:

• All export-related economic activities and services that generate foreign currency cash inflows into the Kingdom.
• All re-export activities for goods passing through the Kingdom (transit trade) that generate foreign currency cash inflows into the Kingdom.

Direct foreign currency credit facilities granted in the aforementioned cases must not be exploited to finance buildings.

The following conditions must be met when granting direct foreign currency credit facilities as stated above:

• Repayment must be in the same currency in which the facility was granted.
• The Bank must have evidence that the aforementioned activities are capable of generating foreign currency cash inflows into the Kingdom not less than the value of the installments and interest of the granted credit facilities, and that the source of these inflows is outside the Kingdom. Necessary arrangements must be taken to remit these inflows to the customer's account with the granting bank or the agent bank in syndicated loans, and this must be documented.

Third: Determinants for Granting Credit Facilities to Persons Not Engaged in Activities within the Kingdom and/or for Financing Activities Outside the Kingdom. Banks are prohibited from granting any direct or indirect credit facilities in Jordanian Dinar or foreign currency to persons who do not engage in activities within the Kingdom and/or for the purpose of financing activities outside the Kingdom, including exempted companies and non-operating foreign companies and entities.

The following are exempted from the above prohibition:

• Opening letters of credit and financing them for the purpose of supplying goods outside the Kingdom without passing through the Kingdom's territory, provided that all necessary procedures are taken to remit these inflows to the customer's account with the granting bank or the agent bank in syndicated loans, and subject to necessary documentation by the bank and providing all documents and assurances confirming the bank's control over foreign currency inflows from abroad. Naturally, the bank bears the responsibility of verifying the existence and application of a suitable credit risk management policy in this area.
• Indirect credit facilities between banks.
• Indirect credit facilities involving performance-related contingencies, as stated in the regulatory capital instructions according to Basel III standard No. (67/2016).
• Credit facilities in Jordanian Dinar or foreign currency for companies registered in free, developmental, or special zones established under the relevant prevailing legislation, provided that the bank has evidence that the activities of these companies are capable of generating foreign currency cash inflows into the Kingdom exceeding the value of the installments and interest of the granted foreign currency credit facilities, and that the source of these inflows is outside the Kingdom. All necessary procedures must be taken to remit these inflows to the customer's account with the granting bank or the agent bank in syndicated loans, subject to necessary documentation by the bank and providing all documents and assurances confirming its control over foreign currency inflows derived from those activities.
• Guarantees issued upon request of exempted companies as a legal requirement for their registration in accordance with the provisions of Article (7) of the Exempted Companies System No. (105) of 2007.
• International foreign currency Murabahas at Islamic banks.

The bank must take all necessary procedures to avoid any legal risks incurred by the bank due to dealing with persons not engaged in activities within the Kingdom. The bank must comply with the requirements of the prevailing anti-money laundering and counter-terrorist financing instructions, including those related to identifying the beneficial owner of banking transactions conducted in those accounts, and that the transactions in those accounts do not involve conducting activities within the Kingdom.

Fourth: General Provisions Jordanian banks are prohibited from arranging the granting of any direct or indirect credit facilities in Jordanian Dinar or foreign currency through their branches and subsidiary companies operating outside the Kingdom to residents within the Kingdom for the purpose of financing activities or services within the Kingdom for purposes not permitted under these instructions.

The opening of documentary credits or the issuance of bank guarantees (letters of guarantee) in foreign currency upon the request of a resident for the benefit of another resident within the Kingdom is prohibited. This does not prevent foreign currency from being considered merely a bookkeeping currency for determining the amount committed in Jordanian Dinar in local credits and guarantees. This is excepted in cases where projects are financed by external or international entities that stipulate in their financing conditions that bank guarantees (letters of guarantee) and/or credits must be issued in foreign currency.

Compliance with the maximum limits permitted for foreign currency credit facilities and credit limits according to the relevant prevailing instructions must be observed.

Banks must regularize the status of credit facilities violating these instructions by the maximum maturity date of those facilities.

The bank must retain monthly data related to foreign currency facilities granted according to the forms prepared for that purpose and attached to these instructions, and must provide us with this data on a quarterly basis starting from March 2021, with the data reaching us no later than the 15th of the following month to which the data pertains. The bank shall continue to provide us with the required information within statements No. (3/a) and (3/b) attached to these instructions only until the status of credit facilities violating these instructions as of the effective date of these instructions is regularized.

The following instructions and circulars are repealed with effect from the effective date of these instructions:

• Memorandum No. (166/87) dated 9/9/1987.
• Circular No. (10/2/3/3/19465) dated 10/12/2002.
• Circular No. (10/2/5098) dated 21/5/2006.
• Item (Fourth/1) of the Instructions on Managing Banks' Foreign Currency Assets/Liabilities No. (32/2006) dated 6/12/2006.
• Circular No. (10/3/12001) dated 17/9/2009.
• Instructions on Direct Foreign Currency Facilities Granted to the Export and Re-export Sectors No. (53/2011) dated 9/2/2011.
• Circular No. (10/1/857) dated 16/1/2020.

Statement No. (1) Direct Credit Facilities Granted in Foreign Currency for Permitted Purposes per Item (Second/a) of the Instructions Amounts valued in Jordanian Dinar | Customer Name | Type of Facilities | Direct Foreign Currency Facilities (Granted/Utilized) | Repayment Nature & Frequency | Purpose of Facilities | Collateral against Facilities | Explanation of Bank's Control Mechanism over Foreign Currency Cash Flows and Documents Available | Amount (Granted/Utilized) | Grant Date | Maturity Date | Grant Currency | Repayment Currency | Total (Granted/Utilized) |

Statement No. (2) a. Letters of Credit and Financing of Letters of Credit for the Purpose of Supplying Goods Outside the Kingdom Without Passing Through the Kingdom's Territory Amounts valued in Jordanian Dinar | Customer Name (Company) | Legal Form (Company Type), Registration Number, and Issuing Authority for Registration Certificate | Indirect Facilities (Letters of Credit for Supplying Goods Outside Kingdom Without Passing Through Territory) | Direct Facilities (Financing of Letters of Credit for Supplying Goods Outside Kingdom Without Passing Through Territory) | Collateral against Facilities | Explanation of Bank's Control Mechanism over Foreign Currency Cash Flows and Documents Available | Letter of Credit Value | Type of Letter of Credit | Purpose of Opening Letter of Credit (Detailed) | Letter of Credit Maturity Date | Letter of Credit Grant Currency | Direct Facilities Balance (Financed Letter of Credit) | Nature of Direct Facilities (Amortizing, Revolving, etc.) | Repayment Nature/Frequency | Financing Currency | Repayment Currency | Total |

Statement No. (2) b. Credit Facilities Exempted per Item (Third/b/2-6) and Listed as Aggregate Amounts Amounts valued in Jordanian Dinar | Item Number | Item Title | Facility Value | | Item (Third/b/2) | Indirect Credit Facilities between Banks | | | Item (Third/b/3) | Indirect Credit Facilities Involving Performance-Related Contingencies per Regulatory Capital Instructions according to Basel III Standard No. (67/2016) | | | Item (Third/b/4) | Credit Facilities in Jordanian Dinar or Foreign Currency for Companies Registered in Free, Developmental, or Special Zones Established under Relevant Prevailing Legislation | | | Item (Third/b/5) | Guarantees Issued Upon Request of Exempted Companies as a Legal Requirement for Registration per Article (7) of Exempted Companies System No. (105) of 2007 | | | Item (Third/b/6) | International Foreign Currency Murabahas | | | Total | | |

Statement No. (3) a. Credit Facilities Granted by Jordanian Bank Branches and Subsidiary Banking Companies Operating Outside the Kingdom in Violation of Instructions, Subject to Bank Regularization Procedures to Become Compliant with Instructions Amounts valued in Jordanian Dinar | Violation Details (Specify Instruction Item Violated) | Customer Name / Customer Code (If Unfeasible Due to Banking Secrecy) | Type of Facilities | Direct Facilities (Granted/Utilized) | Repayment Nature & Frequency | Purpose of Facilities | Nature of Customer Activity (Detailed) | Amount (Granted/Utilized) | Grant Date | Maturity Date | Grant Currency | Repayment Currency | Total (Granted/Utilized) |

Statement No. (3) b. Credit Facilities Granted by Bank Branches Operating within the Kingdom in Violation of Instructions, Subject to Bank Regularization Procedures to Become Compliant with Instructions Amounts valued in Jordanian Dinar | Violation Details (Specify Instruction Item Violated) | Customer Name | Type of Facilities | Direct Facilities (Granted/Utilized) | Repayment Nature & Frequency | Purpose of Facilities | Nature of Customer Activity (Detailed) | Amount (Granted/Utilized) | Grant Date | Maturity Date | Grant Currency | Repayment Currency | Total (Granted/Utilized) |