The World Bank Praises the Performance of the Palestine Monetary Authority

The World Bank issued the Economic Monitoring Report conveyed to the Ad Hoc Liaison Committee, published on 23.09.2012 and submitted to the meeting of the Local Aid Coordination Committee. The report indicated that the Palestinian Monetary Authority (PMA) is currently finalizing a Draft Law to promote its independence and provide it with the legislative framework necessary to become a fully-fledged central bank. It pointed out that the Palestinian banking sector continues to show good performance under the supervision of the PMA, which continues to strengthen its institutional capability and build the required capacity for the establishment of a Palestinian central bank. The PMA persisted in implementing improvements to the infrastructure of the banking sector throughout 2012.

The report added that the PMA provides strict oversight and control over the banking sector in a manner consistent with international practices, including the implementation of the Anti-Money Laundering Act which has been in force since October / November 2007. The Act was prepared in line with international standards, with technical assistance from the International Monetary Fund and United States Agency for International Development (USAID). The PMA continued to implement improvements in the infrastructure of the banking sector during the year 2012. The PMA’s Board of Directors has recently prepared and approved the Banking Deposit Insurance Act. Additionally, work has started on establishing a national switchboard linking local ATMs with POS, and thereby facilitating personal banking operations.

The report adds that the Palestinian banking sector continues to show good  performance under the supervision of the PMA, as it continues to strengthen its institutional capability and the capacity-building necessary for the establishment of a Palestinian central bank. The report indicated that the PMA has and still conducts stress tests on all banks operating in the West Bank and the Gaza Strip, in order to assess the ability of the banking system to deal with a variety of shocks, banks' adaptation to these shocks and their ability to bounce back from them. These shocks include the postponement of payment by the Palestinian Authority of banks dues, and the delayed repayment of loans by the Palestinian Authority's employees, as well as by private businesses which provide the Palestinian Authority with goods and services.

The report added: "The results concluded recently illustrate that that the banking system as a whole, is capable of withstanding these shocks, adapting and going back to normal. However, overall results mask inequalities among banks individually, as the performance of small banks was better than the performance of some large banks." The report noted that the PMA has asked these big banks to raise their capital in order to strengthen their financial position; this was actually accomplished.