Oct 08, 2013
October 2nd 2013 - The Research and Monetary Policy Department in PMA issued the Financial Stability Report in Palestine for 2012, which highlighted the situation of financial stability, developments in various aspects of the financial system during the year, the amount of risk caused by instability, and the means and measures that have been used to reduce the effects of these risks.
Dr. Jihad Al Wazir, Governor of PMA, stated that the purpose of the report is to enhance transparency and clarity for all groups and segments of society, in particular organizations and individuals who deal with the financial system's institutions. This is done by reflecting a clear, accurate, and objective picture of the nature of risks facing these institutions, and their ability to withstand risks as evidenced by several financial, economic, and banking indicators. The portrayal also used advanced statistical methods of analysis and prediction under various scenarios.
The Report included seven main chapters which dealt with Palestine's financial system's stability with its various inherent risks; analysis of the risks facing the banking system; risks associated with non-bank financial institutions; and the global and regional economic developments, including developments in Israeli and Jordanian economies and the implications for financial stability and the local economy.
In addition, the Report addressed the infrastructural aspects of the financial sector; indicators of development in this sector, including in the legal and regulatory framework; and developments in banking regulations. The Report also included a full analysis of the performance of the banking sector based on internationally recognized financial soundness indicators, and a comprehensive analysis of credit risk in the banking sector.
The Report devoted a special chapter to developments in the non-- banking financial institutions, including the money changers, microfinance institutions (MFIs), the stock exchange, insurance sector, mortgage sector, and financial leasing sector. It also discussed the main risks surrounding these sectors.
The Report is distinguished by covering for the first time "stress tests", which focused on the macroeconomic stress tests for the banking system, testing the ability of banks to withstand the collapse of one bank, and analysis of risks associated with what is called "financial infection".
The Report focused on the banking system due to its importance as the backbone of the Palestinian financial system, and as the sector most exposed to risks. In comparison, the non-banking financial sector is still in an establishment and development phase, despite significant developments in some of its institutions, particularly in the area of securities and insurance. This sector requires greater emphasis on monitoring and follow-up on risks to the system.
It is worth mentioning that financial stability has become a growing concern and a key objective of many central banks alongside monetary stability. Focus on financial stability by central banks and international financial institutions reflects the nature the financial sector with all its institutions, and its vital role in resisting risks and supporting economic growth and sustainable development effectively and efficiently.
Re-disseminated by The Asian Banker