Instructions on the External Presence of Jordanian Banks

No. (2004/18)
Issued by the Central Bank of Jordan

In order to regulate the process of external banking presence of Jordanian banks in a manner that ensures the tracking and distribution of their income sources and assets, and in order to improve the level of unified banking supervision exercised by the Central Bank, and based on the provisions of Article (12) Paragraph (Z) of the Central Bank of Jordan Law No. (23) of 1971 and its amendments, and the provisions of Article (17) Paragraph (B) and Article (99) Paragraph (B) of the Banks Law No. (28) of 2000, the following general bases for the external banking presence of Jordanian banks are included, issued pursuant to the decision of the Board of Directors of the Central Bank No. (2004/60) dated 2004/6/22.

1. The external banking presence of Jordanian banks takes the following forms:

• A - Branch, whether ordinary or Offshore.
• B - Subsidiary banking institution.
• C - Representative office.
• D - Any other external banking presence approved by the Central Bank.

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2. Minimum conditions required in the bank wishing to have external banking presence outside the Kingdom:

• A - The bank must have practiced banking work in the Kingdom for a period of not less than (5) years.
• B - The bank must possess financial solvency qualifying it to practice banking activity outside the Kingdom. In this regard, the bank's classification regarding solvency must be within the "Well Capitalized" category according to the definition contained in the memorandum of the framework of corrective measures No. (2004/4) dated 2004/1/11, and the external banking presence must not lead to a decline in this classification.
• C - The bank's classification according to the CAMEL rating system must not be less than (2) (Well Rated).
• D - The management classification (M) according to the CAMEL rating system must not be less than (2) (Well Managed).
• E - The bank must have a written policy regulating the relationship between the bank's management and its external banking presence, which includes at a minimum:
  • Internal audit and inspection system by management for the external banking presence.
  • Authorities of those in charge of managing the external banking presence.
  • Authorities of management regarding supervision over the management of funds sources of the external banking presence and their deployment.

3. Host Country:

When considering applications for external banking presence, the Central Bank will take into consideration the following:

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4. Economic feasibility study:

The bank wishing to have external banking presence must attach to its application submitted to the Central Bank an economic feasibility study including an estimated balance sheet for the financial status of the external banking presence for at least the next three years.

5. General provisions:

• A - The Central Bank may impose higher reserves and/or higher translation risk weights for assets related to the external banking presence if this presence is exposed to additional risks or if the risks of this presence increase in general.
• B - The bank wishing to have external banking presence must commit to providing the Central Bank with the following regarding its external banking presence:
  • Any unusual losses realized and immediately upon realization, and any significant events that may affect the status of the presence.
  • Summary of periodic audit and inspection operations.
  • Reports of external auditors.

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6. The provisions of our memorandum No. (93/249) dated 1993/11/9 are repealed.

7. These instructions shall be implemented from their date.

Please accept the highest respect,

Governor
Dr. Amneh Touqan