Bankers ‘annoyed’ as CBJ issues individual bonds

AMMAN – Commercial banks are "not happy" with the recently issued government bonds for individuals as they see the move as a threat to their saving tools, an informed source told The Jordan Times on Tuesday. 

The Central Bank of Jordan (CBJ) on July 3 made the first issue of the bonds, called “Saving Bonds for Individuals”, at a fixed interest rate of 4.25 per cent for five years.  Subscription in the first issue reached JD27.9 million.

The CBJ on Sunday announced it was preparing to launch a second issue of the bonds –– used in the Kingdom for the first time — adding the issue will be available from late July until early September. 

The informed source, who requested anonymity, said local banks are “annoyed” by the new financing tool issued by the CBJ, adding that executives of banks expressed their reservation when they met with CBJ officials to discuss the project before the launch. 

“Banks believe the move would affect customer deposits,” said the source, who added that the average interest rate offered by banks on deposits in dinar is around 3 per cent, while the CBJ’s bonds carry a 4.25 per cent rate, which will be more attractive to clients. 

The source noted that the CBJ aims to raise JD50 million from the new tool, which would reduce the state’s reliance on banks for financing. 

Adel Sharkas, CBJ deputy governor, told The Jordan Times Tuesday that the purpose of these bonds is to expand medium- and long-term saving tools to allow individuals manage their savings safely and with fixed returns, stressing that the bonds are not meant to jeopardise the interests of the local banks. 

The official added that this kind of bonds is used in several countries such as Egypt, Oman and Singapore. 

“The second issue of bonds for individuals is targeting Jordanian expatriates who recently returned to the Kingdom for holiday,” the deputy governor noted. 

The money raised will be used to finance investment and capital productive projects implemented by the government, he added. 

Issuing government bonds in the Kingdom, including individual bonds, is part of the government’s plan to manage the public debt soundly, the CBJ official said, adding that they would not lead to any increase in the domestic public debt.

According to the CBJ, the bonds for individuals are directly and unconditionally guaranteed by the government and considered as financial notes accepted as guarantees when individuals apply for credit facilities from banks. 

The minimum amount to subscribe to the bonds is JD500 per individual and the maximum is JD100,000, according to the CBJ, which said that at the maturity date, the value of the bonds will be deposited in the banking account of each subscriber. 

Subscribers can liquidate bonds before the maturity period by selling the bonds in their possession to the CBJ. 

To make it easier for individuals to subscribe to these bonds and examine the terms and conditions, the CBJ has launched a special window on its website with high levels of security, speed and efficiency, to enable individuals to subscribe from anywhere and at anytime, Sharkas said.

Regarding payment methods, the CBJ provided developed e-payment tools, such as e-FAWATEERcom, in addition to the ability to pay through banks or bank transfers (SWIFT messages).