Appendix III. Excerpts from MENA Central Bank Statutes Relating to Collateral
- Simon Gray, and Philippe Karam
- Published Date:
- May 2013
Central Bank of Kuwait
Within the provisions of this Law, the Board of Directors shall exercise the full powers necessary to perform its duties, and shall do the following in particular:
- (c) determine the system of discounting and rediscounting commercial papers and of granting loans and advances, and specify the collateral required;
For the purpose of financing development projects or strengthening the financial market, the CB may upon approval of the Minister of Finance:
- 2. extend loans to banks, public financial or credit establishments, against collateral of their holdings of such shares or bonds. Provided that the total amounts allocated for the acquisition of the aforementioned shares or bonds, or for lending against the collateral of their holding, does not exceed the value of the reserves of the Bank;
The CB may carry out the following operations with banks only, and not otherwise:
- (b) give loans or advances, in emergency cases, through current account for a period not exceeding six months against such collateral as the Bank may consider adequate.
Central Bank of Bahrain
Chapter 6 Central Bank’s Transactions and Investments
Article (31) Prohibited Transactions
Except as otherwise provided for in this law, the CB shall not:
- (5) Accept shares or convertible public debt instruments as collateral.
Part 6 Netting and Collateral
Chapter 1 Netting
Article (108) Close-Out Netting Due to Market Contract
- (a) The CB shall issue regulations regarding conditions and controls to be incorporated in a Market Contract as well as the procedures for carrying out clearance according to such contract.
- (b) Notwithstanding the provisions of any other law relating to clearance, bankruptcy or insolvency, any Close-out Netting shall be carried out according to the Market Contract in connection with debts, loans and dealings between the parties thereof that were originated or completed before any of the parties became insolvent or bankrupt.. The same shall apply against the parties of the contract their receivers in bankruptcy and their creditors.
- (c) The previous paragraph shall not apply if one party knew or ought to have known that:
- an application, for the liquidation and winding up of the other party by reason of insolvency, is being considered by the concerned authority.
- the other party has taken formal steps under any other
Article (109) Exceptions
- (a) Notwithstanding the provisions of any other law, no restriction or suspensions shall be applied to any provision related to clearance according to a Market Contract.
- (b) Notwithstanding the provisions of any other law relating to clearance, bankruptcy or insolvency, the parties in a Market Contract may;
- (1) agree to any system which will enable the parties to convert a non-financial obligation into a financial one of equivalent value and to valuate such an obligation for the purposes of any clearance or Netting.
- (2) agree on the rate of exchange or the method to be used to establish the rate of exchange to be applied in effecting any clearance or Netting when the sums to be cleared or netted are in different currencies, and to establish the currency in which payment of the net sum is to be effected.
- (3) agree that any transactions carried out pursuant to any Market Contract shall be treated as a single transaction for the purposes of the contract whether such transactions were completed by the parties, a receiver in bankruptcy, a competent court, an officer representing the parties or that such transactions have been categorized or attributed to a certain type of trading.
Chapter 2 Collateral
Article (110) Provisions Governing the Collateral
With consideration to the provisions of the Civil Law and Commercial Law regarding pledging, the CB shall issue the terms and conditions for the provision of any pledge, insurance, collateral or title transfer collateral to beneficiaries according to a Market Contract.
Central Bank of Sudan
Shares of financial enterprises held
- 54. The Bank may subscribe to the shares of any enterprise, purchase, sell or hold such shares, whenever participation to such enterprise, or the initiation thereof, achieves the objectives of the Bank, or the same is generally in the interest of the national economy.
Operations which the Bank shall not undertake
- 55. The Bank shall not:-
- (f) purchase, or acquire shares, or accept the same as collateral security, save in accordance with the provisions of section 54;
Central Bank of Oman
Article 14 Powers
The Board of Governors shall be authorized and empowered to do the following:
- (q) To promulgate regulations of the CB and to issue directives to particular licensed banks concerning the relationship between collateral and the purposes of the loan secured by such collateral and the limitations on the amount of collateral which a licensed bank may require as security for the loan of money or the extension of credit;
Article 28 Investment and Credit Functions
The CB, when so authorized by the Board of Governors and except as otherwise provided by this Law, may undertake to do any one or more of the following:
Grant advances to licensed banks for fixed periods not to exceed 90 days at a rate of interest determined by the Board of Governors, provided, however, that such advances are evidenced by promissory notes secured by a pledge of one or more of the following collateral:
- (1) Securities of the Government of the Sultanate which have or will have a public market and are to mature within a period of not more than ten years, provided, however, that any such advance may not at any time exceed 75 percent of the current market value of the security pledged;
- (2) Promissory notes and other negotiable instruments eligible for purchase, discount or rediscount by the CB under this Article 28, provided, however, that any advance shall not exceed 75 percent of the principal amount of the instruments pledged.
Central Bank of UAE
Chapter Four Management
Section Two: Jurisdiction and Meetings of the Board of Directors
The Board of Directors shall, within the limitations imposed by this Law, exercise all powers required for attaining the objectives for which the Bank has been established. In particular, the Board of Directors shall exercise the following:
- 7. Establish rules to govern the granting of loans and advances to domestic banks, define the upper limits of such loans and advances and specify the collateral security required thereof.
Chapter Five Operations of the Bank
Section Two: Relations with Local Banks and Financial Institutions
The Bank may carry out the following operations solely with banks operating in the United Arab Emirates:
- 3) Offer loans or advances on current account for seven days without collateral, or up to six months against such collateral as the Bank may deem adequate.
The Bank shall not renew maturing bills that have been discounted by it nor shall accept, for discount or as a collateral any commercial paper signed by a member of the Board of Directors, or by any of the Bank’s staff.
Chapter Seven Miscellaneous Provisions
The bank may accept real estate and movable property mortgaged or pledged as collateral security, or transferred to it by relinquishment in its favor as a guarantee for settlement of its claims.
Central Bank of Jordan
- (a) The CB may discount or rediscount for, sell to, or buy from Licensed Banks the following credit instruments;
- 2. Bills of exchange, promissory notes and other credit instruments drawn in the Kingdom to finance industrial, tourism, agricultural, constructional or mining operations provided that they mature within not more than nine months from the date of their acquisition by the CB, and provided that the Licensed Bank concerned undertakes to repurchase them on the dates fixed by the CB. The CB may require as collateral the assignment, mortgage or pledge of the related products or properties, or demand any other security or collateral.
Palestine Monetary Authority (PMA)
The Monetary Authority may provide banks with loans or advances for a period not exceeding 120 days to cover their cash flow requirements, the collateral for which may be from any of the following assets:
- international reserves instruments;
- other public debt securities issued or guaranteed by the National Authority which constitute a part of a public subscription;
- deposits with the Monetary Authority or another depository acceptable to the Monetary Authority in the form or assets which, in accordance with this law, the Monetary Authority is permitted to buy, sell, or deal in, them including gold.
Central Bank of Egypt
Chapter 4 Supervision over Banks and Guaranteeing Deposits
The Board of Directors of the CB shall set rules for regulation and supervision over banks, and the regulations relevant to their activities according to the provisions of this Law, with due regard to international banking norms, providing they shall comprise the following:
- (D) the maximum limits of the lending value of the collateral/guarantees provided against finance and credit facilities, and the determination of maturities,
To extend a credit to the customer, the Bank shall ensure that he is of good reputation and has adequate self-resources, and the studies establish that the expected cash flows of his activities are adequate to fulfill his obligations.
The bank, in the cases judged thereby, shall ask the customer to provide additional collateral/guarantees, whether in-kind, or of any other nature accepted by the bank.
The Executive Regulations of this Law shall set forth the standards of evaluating the collateral/guarantees provided to the bank for the finance and credit facilities it extends to the customer. The Executive Regulations shall also set forth the necessary regulations for applying the provisions of this Article.
No credit shall be renewed or modified before the customer’s approval of the balances of finance and credit facilities offered to him by the bank.
The CB shall prepare a register of the houses of expertise that are capable of participating in the evaluation of the collateral/guarantees provided to banks. The Executive Regulations of this Law shall set the rules, conditions, and procedures of recording in this register, and shall specify the obligations of those in charge thereof. These houses shall be responsible for the contents of the evaluation reports.
Each bank shall maintain a register of the in-kind collateral submitted by customers for the finance and credit facilities offered to them, and shall ascertain the validity of this collateral, its title deeds, and its value upon providing the credit.
The audit committee prescribed in Article (82) of this Law shall ensure that the executive management at the bank verifies the values of this collateral periodically, and shall determine the measures to be taken for facing any drop in these values.
These registers shall be subject to inspection by the CB that may ask for a confirmation of this collateral whenever necessary.