Palestine Monetary Authority Holds Workshop on Procedures to Deal with Returned Checks

Dr. Riyad Abu Shehadah, the Deputy Governor of the Palestine Monetary Authority, opened, on behalf of His Excellency Mr. Azzam Shawwa, the Governor Palestine Monetary Authority, workshop about PMA’s procedures relevant to dealing with returned checks. Mr. Ali Far’oun, the Director of the Market Conduct Department at PMA, ran the workshop. The following attended the workshop: General and regional directors of the banks that operate in Palestine, business managers, PMA directors, Palestine Capital Market Authority, Association of Banks in Palestine, Palestinian Network for Small and Microfinance (Sharakeh); Union of Real Estate Developers, Palestinian Society for Consumer Protection, and the Legal Advisor of the Council of Ministers. Moreover, representatives of ministries, official agencies, universities, and financial, economic and legal organizations, experts, economy media officers,the European Palestinian Credit Guarantee Fund, and the Middle East Investment Initiative joined the workshop.    

Dr. Riyad Abu Shehadah welcomed the participants in the workshop. He said the workshop was based on PMA’s strategy, endorsed by PMA’s Board of Directors, to limit the number of returned checks for insufficient funds, which was within the framework of developing, automating, and modernizing system of means of payment in Palestine. 

Dr. Riyad Abu Shehadah addressed the importance of financial stability in Palestine, which was among the first priorities of PMA and its policies, instructions, and procedures. PMA mainly focuses on having a financial and banking sector that is capable of handling and facing risks and negative economic impacts. PMA also focuses on safeguarding the stability of the financial and banking sector to ensure that it carries out its vital economic role efficiently and effectively, according to Dr. Abu Shehadah. PMA has throughout previous years set up and implemented reform plan based on key components to lay and develop foundations of proper, effective, and safe infrastructure of payments system services in Palestine as important element of financial stability, says Dr. Riyad Abu Shehadah. This is part of the framework to enhance and maintain the components of financial stability. The components are part of reform plan that PMA has continuously worked on and aimed to launch new services and systems for the benefit of the various financial sectors. 

Dr. Riyad Abu Shehadah also stated that the workshop was to address and share views about returned checks for insufficient funds, which had been an issue of concern for many people involved in monitoring economic and financial issues in Palestine. The difficult and unstable political conditions have affected the economic situation throughout previous years and have clearly increased the number of returned checks for insufficient funds reaching its highest level of 6% of deposited checks toward the end of 2017. PMA monitors this situation persistently and has taken measures to address and limit the risks of this problem.

Dr. Riyad Abu Shehadah hoped the outputs of the workshop would help make future policies to address the problem of returned checks for insufficient funds. The measures PMA will take are precautionary and strict and will directly affect using checks in commercial transactions.    

Mr. Ali Far’oun addressed in the workshop the period before the system of returned checks was used. Work then was based on using two lists; black list and limited users, which could not deliver an integrated source to inform about clients’ returned checks at different bank accounts, returned check among the branches of the same bank, Israeli and foreign clearance. The returned checks system delivers inclusive database of clients who had their checks returned in all bank accounts for insufficient funds or for technical reasons. The system also categorizes such clients automatically using specific aspects that assist PMA and banks in safeguarding checks and reducing the risks and numbers of returned checks.  

Mr. Far’oun also detailed the five degrees of categorization in the returned checks system, which had positive impact on reducing banking, economic, and social repercussions of returned checks. Mr. Far’oun addressed the reasons for the increase in the number of returned checks for insufficient funds including lack of stable political and economic situation, excessive borrowing by public and private sectors employees, delayed payment of salaries and deductions made from such salaries, early retirements, defaulting and exchange of guarantees in facilities, and growth in opening current accounts with checkbooks.

Mr. Ali Far’oun also addressed the measures taken by PMA to limit the number of returned checks in the first phase, including restrictive consensual settlements, linking private sector companies to the integrated credit information system, and the impact of the measures on reducing the number of returned checks. Mr. Ali Far’oun presented the measures that are currently submitted for debate, including reduce consensual settlements, restrict giving checkbooks to close relatives of clients classified in the system, adjust the number of returned checks subject to classification, and enhance judicial procedures. 

The workshop discussed participants’ observations and questions about the measures to be taken by PMA, the positive impact of such measures, and their approval before new instructions to address issuing and checks are issued.