Local banking sector capable of withstanding shocks — CBJ

AMMAN — Banks in Jordan have sound and healthy financial indicators with a capital-adequacy ratio of 17 per cent, the Central Bank of Jordan (CBJ) said on Monday.

In its “Financial Stability Report for 2018", CBJ said that the ratio of non-performing loans to total debt reached 4.9 per cent in 2018, while allocations for non-performing loans increased to reach 79.3 per cent, in comparison with a coverage percentage of 75.4 in 2017.

Financial stability is meant to enhance the capacity of banks and other financial institutions to withstand risks and to limit any structural imbalances, as pertinent to the amended law of the CBJ for the year 2016, which expanded the objectives of the regulator to explicitly maintain financial stability and monetary stability.

The stress testing results, which are used to measure the ability of banks to withstand shocks, showed that the local banking sector is generally capable of absorbing high shocks and risks, even under severe assumptions and scenarios of political and economic turbulence in neighbouring countries and their impact on financial stability in the Kingdom, expecting capital-adequacy ratios of 16.5, 15.7 and 14.8 per cent for 2019, 2020 and 2021 respectively.

The facilities granted by banks to individuals in 2018 grew by 3.7 per cent, which is less than the percentage of total bank facilities' growth of 5.3, according to a CBJ statement cited by the Jordan News Agency, Petra.

The lending-to-income ratio for individuals borrowing from banks remained stable at 40 per cent of borrowers' monthly income. 

The number of Jordanians borrowing from banks stood at 1.1 million, constituting 16.6 per cent of the population, the report indicated, adding that Jordan and Lebanon were ranked in the third place among Arab peers in terms of the rate of borrowers.

The study also said that 92 per cent of companies can cope with their debt rates in case of financial shocks related to higher interest rates or lower profitability. 

The report said that the real estate market in 2017 and 2018 experienced the repercussions of slower economic activity in Jordan and political and economic developments in the region in a clearer way than in previous years. In 2017, the volume of investments in the property sector dropped by 14.1 per cent while trading volume dropped by 13.1 and 23 per cent in 2018 and the first half of 2019 respectively.

The real estate price index went down by 0.9 per cent in 2017, slightly increased in 2018 by  0.2 per cent, and dropped again in the first quarter of 2019 by 0.6 per cent.

Credit facilities extended for the real estate sector for housing and commercial purposes totaled JD5.5 billion in 2018, accounting for 21.6 per cent of total facilities.