Book an appointment with us, or search the directory to find the right lawyer for you directly through the app.Find out more
We are excited to share the latest edition of the Law Update, beautifully and appropriately titled “Sustainable Horizons: The Saudi Arabian Vision.” Giving special honor to the Kingdom’s 2030 vision, this update focuses on a collection of both informative and inspiring articles.
For those in construction, you can learn about how the tendering environment impacts risk-pricing for contractors, the updates on the legal framework of the construction industry and how contractors can protect themselves against financial difficulties.
There is good news too from the kingdom’s banking sector, from which the practice of “Open Banking” is being pushed for! But what is open banking? We’re answering that too.
Also . . . Are there any women trail blazers in Saudi Arabia you can name? We’ll help you with that. We cover how the Middle East has been making strides in empowering women in the entrepreneurial space,most notably in STEM fields.Read the full edition
For these reasons, the government has drafted an amendment to the Jordanian Banking Law No. 28 of 2000 (“the “Banking Law”) in a manner that gives the Central Bank more oversight and authority over the management in banks in order to maintain the security of all financial transactions deriving therefrom. The draft of the Amended Banking Law (the “Draft”) has not yet been passed as it is still under review.
Appointing the Management of the Bank
First, the Draft gives the Central Bank full discretion to determine the number of members of the Board of Directors and the Independent Members in addition to the conditions and requirements of this independence. These requirements have been highlighted in the Corporate Governance Instructions for Banks No. 58 of 2014 (the “Instructions”), which provides in Article 6(d) that the qualification of a Board Member as an independent director shall be subject, as a minimum, to the following requirements:
The Central Bank also has the right to object to the nomination of any person to the membership of the Board of Directors if the Central Bank finds that the nomination contradicts the requirements stated above or if this person is less than twenty five years of age, not of good reputation or is a member of the Board of Directors, general manager, regional manager or an employee of any other bank (provided that this bank is not an affiliate).
Secondly, the Draft stipulates that the general manager of the bank shall not be related, up to the third degree, to the chairman of the Board of Directors, any of its members or any Qualifying Shareholder. The Central bank shall also be entitled to apply the same condition to any of the high positions in the bank. Additionally, the Central Bank may object to the appointment of the general manager of the bank or any of the high positions if the appointment was not in full compliance with article 25 of the Banking Law which explicitly requires the appointed person to be of good reputation, not to be a member of the Board of Directors of any bank (provided that this bank is not an affiliate), to be fully dedicated to managing the bank’s activities and to hold sufficient banking expertise and qualifications.
Financial Crisis Procedures
In the event that a bank encounters a situation that has a fundamental effect on its financial status, the Draft entitles the Central Bank to take, in coordination with Jordan Deposit Insurance Corporation (the “JDIC”), any of the procedures stated below if it would be a better approach to achieve financial banking stability and of lower cost than commencing the liquidation process:
If the sale or merger stated above were not possible or if the Central Bank saw that delaying this decision may decrease the cost of correcting the situation, then the Central Bank may establish a bridge bank in coordination with the JDIC. The following provisions shall be utilized to facilitate the creation and operation of this bridge bank:
It is also worth noting that, in relation to the above, the Draft further empowers the Central Bank as follows:
The amendments highlighted above constitute a step forward in ensuring and maintaining the transparency of the management of Jordanian banks in addition to a set of steps and procedures for aiding banks that are encountering financial problems. All being said, the Draft attempts to avert any future financial crisis by expanding the Central Bank’s oversight of management and setting a plan for banks in trouble. Such an approach should reflect positively on the financial market, increase consumer protection and hopefully reduce the number of financial crimes.
To learn more about our services and get the latest legal insights from across the Middle East and North Africa region, click on the link below.