World Bank Commends Again Palestine Monetary Authority Crucial Role in Crisis

Ramallah, 21 September 2014

In a report prepared for the Donor Ad Hoc Liaison Committee (AHLC) at its conference held in New York on 22/9/2014, the World Bank commended again the role of the Palestine Monetary Authority (PMA) in the management and organization of the banking sector, particularly in crises; last of which was the Israeli aggression against the Gaza Strip.

The World Bank report pointed out that despite significant losses in Gaza, the banking sector remained healthy thanks to the efforts of the PMA. The sector has been well regulated by the PMA which has steadily been building the capabilities of a central bank. The report noted that the PMA was carefully monitoring risks related to high credit exposure associated with loans to the Palestinian Authority and public employees.

The report also noted that the year-on-year growth of the sector’s net assets was 15 percent in June 2014, and its net income grew by 4 percent when compared to the same period last year. The report cited the ratio of non-performing loans to gross loans standing at a 3 percent low; however, this was expected to increase due to the recent conflict as the capacity of some individuals and businesses to service their loan installments has significantly deteriorated.

The report made mention of the fact that the PMA had already taken measures to deal with the effects of the latest conflict on the banking sector. It had recently asked banks to reprogram loans (principal and interest payments) for six months and wave some fees for the people of Gaza. It had also reduced risk reserves from 2 percent of risk weighted assets to 1.5 percent, with the aim of preserving bank profitability and financial positions.

The World Bank had in previous reports affirmed that, during the past few years, the PMA had implemented regulatory measures aimed at building a modern banking system and had adopted internationally applied regulatory standards, as for example the standards in relation to loan rating, governance, licensing procedures, risk management and capital adequacy, in addition to the enforcement of the Palestinian Anti-Money Laundering Law in accordance with to internationally-accepted standards.