Banks: 'Reform… only away from me!'

تم نشره في Wed 4 June / Jun 2014. 11:06 AM - آخر تعديل في Wed 4 June / Jun 2014. 11:07 AM

By Jumana Ghunaimat

The Central Bank of Jordan’s regulations relating institutional governance are being turned down by some banks’ boards that find it in a preach of its power and a breakdown of its influence, which led to many reservations over them.

One of the most notable regulations, which is binding and not indicative, relates to the outlawing of using the same person a director general and chairman, and outlawing the hiring a two people who are blood related in the boards of directors and the public administration, all the way to the third cousin.

Additionally, the chairman of the board, under the new regulations, is not allowed access to executive powers the allow him to grant credit to a member of the board. Members of the board need to be at least 11 members, including four members who are neutral.

One of the most important items is that relating to bonuses; the item links them to the level of risk, and does not affect the bank's reputation and financial solvency. That comes as a result of an exaggeration of some banks in the value of those bonuses, which are sometimes up to about half a million dinars.

The regulation is still a draft, not yet officially in effect. The central bank has given banks a one year deadline to rectify their positions in line with the standards that will take the structure of management to a new phase.

Seeking to apply these regulations is a reform step par excellence. It is late, anyways, but banks are seeking to postpone its implementation, and maintain status quo, in order to avoid altering the privileges of the managers, some of which are infinite.

Banks justify their reservation on the new regulations with that the timing was not right, and that the implementation of these instructions now would disrupt the work and performance, and adversely affect the financial results of banks.

In this context, the boards of the banks held consecutive meetings to put pressure on the central bank to postpone the implementation.

Banks say the separation of ownership from management currently hampers work. It gives examples of banks that faced problems as a result of the competition between the chairman and the director general of the bank, which has hampered work.

In contrast, according to them, other banks which did not separate ownership from management are still achieving positive results, and do not need those instructions to improve their work. Some argue that money management by its owner leads to better results.

Separation of ownership and management is an old theory. Jordan’s delay in implementing it makes the banking system vulnerable to any potential shocks and surprises. Also, the banking institutions are finally public joint stock companies, and the duty of the central bank is to apply transparency. They are not private property, and should not be dealt with on this basis.

Family ​​banks have always been under criticism, but the intransigence of the boards of banks and their decision to block such a reform step have delayed its implemented for many years.

As a result, these regulations are important for the implementation of disclosure and transparency. And banks, to protect themselves before the central bank, should seek to apply it.

What is happening in the banks of reluctance to implement this important reform is a microcosm of what is happening in our country; either by the political, union, or social and civil society organizations; reform is demand that does not affect their earnings, nor does it affect them; as if they were saying: “reform… only away from me!"



This article is an edited translation from the Arabic edition.