Main Features

The Main Features of the Deposit Insurance System in Jordan are:

 

1.   Public - Policy Objectives:

Protecting depositors with banks by insuring their deposits in accordance with the provisions of Jordan Deposit Insurance Corporation(JODIC)'s  Law in order to encourage savings and strengthen confidence in the Kingdom's banking system.

2.   Governance Structure:

 

o   JODIC enjoys a corporate entity status with financial and administrative independence.

o  Managed and supervised by a Board of Directors chaired by the Governor  of the Central Bank of Jordan (CBJ) and comprises four members from the public sector, including the Deputy Governor of the Central Bank of Jordan and the Secretary General of the Ministry of Finance, the Controller of Companies at the Ministry of Industry and Trade and the Director General of JODIC, in addition to two members from the private sector appointed by the Cabinet. The two members must not be executives of any bank during the period of their membership on the Board and for the two years following the termination of their membership.

 

3.  Membership:

 

o  Compulsory: All Jordanian banks and branches of foreign banks operating in the Kingdom, excluding branches of Jordanian banks operating outside the Kingdom.

 

o   Voluntary: Islamic banks licensed to operate in the Kingdom.

    

4.  Mandates:

 

o    Reimbursement of Depositors:

 

 The insurance limit becomes payable if the CBJ decides to liquidate   a member bank.

 The insurance sum should be paid to the insured depositor within 30 days from submitting a deposit claim.

 

o    Liquidation:

 

 JODIC is the sole, legal representative of any bank that the CBJ decides to liquidate.

 Must complete liquidation proceedings within two years, and may be extended –for justified reasons- on yearly basis.

 

o    Regulatory and Supervisory Duties:

 

 The JODIC may examine banks’ annual financial statements and the results of their operations that are available at the CBJ.

 Upon the CBJ's approval, a joint inspection team to examine any bank conditions can be formed from the employees of the JODIC and the CBJ.

5.  Coverage:

 

o    Limit: A maximum insurance sum of JD 50,000 (fifty thousand Jordanian Dinar) ( * ) per depositor per member bank, when a member bank is liquidated.

 

o    Currency: Jordanian Dinar.

 

o    Deposits: Total deposits at member banks excluding: 

 

 Government deposits.

 Inter bank deposits.

 Cash collaterals within the limits of the value of the extended facilities guaranteed by the said collaterals.

6.  Funding:

 

o    Capital:

 

 Capital consists of JD 1 million paid by the Government and JD 100,000 an initiation fee paid by each member bank.

 

o    Annual Membership Fees (Premiums):

 

Annual premiums paid by member banks at the rate of 2.5 per thousand of the total deposits subject to the provisions of JODIC's Law:

 

 The Board of Directors may increase the annual membership fee to no more than double the annual membership fee for banks stipulated in JODIC's Law, if JODIC's reserves do not reach the targeted level subject to the provisions of JODIC's Law, or if a liquidation of a bank is decided before the Corporation's reserves reach the targeted level.

 

 The Board of Directors may increase the annual membership fee of the bank to no more than double if the CBJ finds, based on the applicable rating rules, that the degree of risk assumed by a bank has become unacceptable.

 

 Rules for calculating premiums can be changed after rating member banks subject to the approval of Council of Ministers.

 

o   The Returns on the Investments of JODIC's Funds.

 

o   Any financial grants given to the JODIC with the approval of the Central Bank's Board of Directors, and the Council of Ministers' approval if the grant is given by a non- Jordanian agency.

 

o  Borrowing Capacity:

    JODIC may borrow directly or may issue debenture bonds.

7.   Investment of Funds:  

 

Funds are invested in bonds issued or guaranteed by the Jordanian Government, it may also invest its funds in deposits with the CBJ.

 

8.   Fund Target Ratio:

 

In order to be able to meet its obligations stem from its role as insurer and sole liquidator , JODIC must act to form funds (reserves) amounting to 3% of total deposits subject to the provisions of JODIC's Law.

 

9.  Bank Secrecy - Confidentiality: 

 

The Board of Directors and employees of the JODIC must maintain full confidentiality regarding all statements or information which they examine.

 

  The Cabinet decided on December 5th, 2010 to increase the coverage limit from JD 10,000 to JD 50,000 to be effective on January 1st, 2011.