The Monetary Authority and the Palestinian Securities Exchange Agrees on Actions to Support Liquidity in the Stock Market
Yesterday the Monetary Authority announced that the Palestinian Securities Exchange formally consented to allowing banks operating in Palestinian territories to lending for equity trading purposes. This according to certain regulations that will be discussed between the two sides, in addition to the Capital Market.
The Monetary Authority governor Dr.George Alabed, the President of the Governing Council, and the executive chairman of the PSE Dr.Hassan Abulibdeh held a meeting at the Monetary Authority Headquarters in Ramallah yesterday in search of steps and procedures necessary to support the Palestinian activity in the stock market.
Alabed told “Alayyam”: We agree in principle and we are now in the process of developing regulations and instructions to banks to open the way for lending for the purpose of buying shares in accordance with the controls we agree upon with the market.” The markets management made a request last March to the Monetary Authority in order to issue instructions to banks to allow them to lend shares to traders. The markets management attached a request study on the restrictions of this process, which included a breakdown of the positions of companies at the financial performance during the year 2006.It made two lists, one with the companies having excellent shares which was 6 companies in all and the other list having names of companies and the other list containing companies that are good standing which are also 6.This in order to be reviewed annually in this classification. Under the markets proposal, the shares purchased from excellent companies are calculated as 50% of a loan guarantee, and in order to provide the borrower further guarantees remaining value of the loan, while the calculated purchased shares in good standing companies have 30% of the safeguard and others guarantee a value remainder of the loan being 70%.Alabed said” We guided the proposals to develop the markets control. We hope our instructions were useful for the banking system in this area, note that the resolution of any bank credit to any customer for any purpose of the draft is due to the bank’s management itself.” He added,” We have a new round for the final revision of these standards and controls, including controls proposed by the market, and we will be discussing with banks to remote sensing estimates of the risks, and determine how best to address this issue. These instructions will be issued within a week or two maximum. I believe that we will emerge a rate acceptable to all and hope it will help revive the stock market.” The Monetary Authority Governor said that the markets decline is linked to several factors including liquidity and the security situation, but our role should be a positive part of our responsibilities towards revival of the Palestinian economy and the engine of growth.” The Monetary Authority prevented banks in the year 2000 for the purpose of lending or trading in stock speculation. Alabed stated,” The monetary authority had taken the decision in a timely manner because of the growing risks and problems as a result of lending to buy shares” He added,” We have this experience and develop liquidity in banks and benefited from discussion with the market and given the current economic situation and recent developments in the Palestinian arena, and these factors reopened the subject orientation Monetary Authority for rehabilitation of the market thus the economy in general.” Alabed stressed that the decision made by the monetary authority and the securities exchange, which affect the ability of the market to provide the maximum protection for investors and a favorable environment for investment.
Abulibdeh told “Alayyam Newspaper” that the governor of the Monetary Authority to understand market needs to issue series of circulars and directives of the banking sector and practical action to overcome some problems that limit the possibilities for the banks in turn support the stock market. He added that we agreed on by the Monetary Authority has taken a number of decisions during the coming hours and days in several areas, notably allowing banks to provide financial facilities for the purpose of trafficking equity according to certain rules issued. Among circulars ahead of monetary authority also, according to Abulibdeh, he emphasized on the banks full commitment to the securities market and the rules regarding disclosure of financial data: quarterly and semi annual and annual reports and all other essential matters in addition to other measures to assist in organizing the relationship banks the securities sector. Also Abulibdeh said he agreed with the governor of the Monetary Authority to issue a circular urging bank to set up investment funds which will be the gate to inject new liquidity on the stock market. Abulibdeh expects leaving instructions and procedures anticipated by the monetary authority positive effects on the Palestinian stock market in the medium and long term. He said no one can prepare a concrete impact of these actions in a few days but will play a role in the medium and long term in activating the market on the other hand, in light of facilitating transactions and the conversion of the deposit and withdrawal smoothly without complications for the purpose of trafficking equity. He also added that what concerns us is that there is a regulatory framework for the contribution of the banking sector in providing liquidity to the securities industry and I believe that the results of the meeting yesterday will allow investors to the possibility of exploiting the liquidity available to banks to invest in securities.