Regulatory Alerts2026-07-14
Added · Updated
Responses to Banks' Inquiries Regarding Liquidity Coverage Ratio Instructions
The regulator maintains the cap on foreign currency Jordanian government bonds within Level 1 High-Quality Liquid Assets, aligning with Basel standards and Capital Adequacy Instructions No. 67/2016 which assign a 100% risk weight to these instruments. Foreign currency government-guaranteed debt instruments are excluded from the Liquidity Coverage Ratio numerator as they do not qualify as High-Quality Liquid Assets due to liquidity constraints during stress periods. The requirement for Treasury Departments to maintain continuous authority to liquidate assets within 30 days is upheld as a fundamental Basel criterion for HQLA classification.
Responses to Banks' Inquiries/Observations Regarding the Application of Liquidity Coverage Ratio (LCR) Instructions Observation: Proposal to exclude foreign currency debt instruments issued by the Government of the Hashemite Kingdom of Jordan from the cap on High-Quality Liquid Assets (HQLA) within Level 1 assets, which was set as a maximum based on the net foreign currency cash outflows resulting from the stress scenario and arising from the bank's operations in the country where liquidity risks originate. Answer: This cap has been maintained for Jordanian government bonds in foreign currency, guided by the Basel paper on this matter, and in line with Capital Adequacy Instructions No. (67/2016), which assigned a 100% risk weight to these bonds, whereas the risk weight for government bonds in Jordanian Dinar is 0%. Observation: Proposal to include debt instruments/sukuk guaranteed by the government in foreign currency within Level 1 assets for the numerator of the Liquidity Coverage Ratio. Answer: According to the instructions, debt instruments/sukuk guaranteed by the Jordanian government in local currency are included in Level 1 for the numerator of the ratio under item [Third/1.7/c]. However, debt instruments/sukuk guaranteed by the government in foreign currency are not considered High-Quality Liquid Assets, which is consistent with Basel requirements on this matter, due to the difficulty of liquidating, selling, or transferring these foreign currency-guaranteed assets in a timely manner during stress periods and using them as a source of liquidity during stress periods. This is also linked to the risk weight of these bonds, and they may be included in HQLA if their risk weight decreases. Observation: Possibility of exempting the requirement in the instructions [item Third 5.2] regarding granting the relevant department (usually the Treasury Department) continuous authority and operational and legal capacity to liquidate any of these HQLA within 30 days. Answer: This is one of the main requirements according to the Basel paper for assets to be considered HQLA. Observation: How will foreign currencies in foreign branches be treated when calculating at the banking group level? As foreign currency in Jordan may be the local currency in foreign branches. Answer: The local currency for foreign presences refers to