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	Palestinian Authority		Info-Prod Country Guide
BACKGROUND   JUDICIARY   BUSINESS FORMS & STRUCTURES   CURRENCY & BANKING   INTELLECTUAL PROPERTY   TAXATION   INVESTMENT & TRADE   ENVIRONMENTAL LAW

Currency and Banking Foreign Currency Control In areas of the West Bank which are under the control of the Civil Administration, the Controller of Banks regulates currency transfers, which are in line with the currency control laws applicable in Israel. Furthermore, while bank accounts may be held in any of three currencies - U.S. dollars, Jordanian Dinars or New Israeli Shekels - withdrawals from accounts located in the West Bank under the control of the Civil Administration may be made only by converting the amount into either NIS or JD. Banking General Under Oslo 2, responsibility for banking has been transferred to the Palestinian Authority. The Paris Protocol contains significant provisions which will affect Palestinian banking when implementing legislation and regulation is effected. The Paris Protocol authorized the creation of the Palestinian Monetary Authority (PMA), which enjoys the powers that most central banks have, with the notable exceptions that it cannot issue a Palestinian currency and it cannot apply for state membership status in the International Monetary Fund. The PMA supervises fiscal policy in the Palestinian Authority and manages official reserves. It also reviews proposed legislation which will regulate banking in the future. Regular savings accounts and interest bearing checking accounts in dollars may be opened in the West Bank and Gaza. Accounts may be held in U.S. dollars, Jordanian Dinars or in New Israeli Shekels, and all three currencies are used for conducting business in the Palestinian Authority. In the absence of a Palestinian currency, banks operating within the jurisdiction of the Palestinian Authority have to compete for deposits with banks located elsewhere. The competition is mostly for local resident deposits. Unlike Israeli banks, local banks are generally not allowed to offer inflation indexed savings accor foreign currency dominated accounts, which places them at a relative disadvantage in competing for the accounts of large Palestinian firms and international organizations. While many financial institutions are now operating in the Palestinian Authority, two of the most active banks are the Arab Bank and the Cairo Amman Bank. As Palestinian banking is still in its infancy and the banks which operate in the Palestinian Authority are unable to assess credit risk and worthiness, mid - and long - term financing is often difficult to obtain. It is anticipated that this will change as experience is gathered by the lending institutions as well as the promulgation of regulations and guidelines by the PMA. As of 1997, there were seventeen commercial banks with sixty-nine branches operating in the PA areas of West Bank and Gaza, including one foreign bank (Australia New Zealand Grindlays). The largest bank is the Arab Bank, which currently has seventeen branches worldwide, including two in New York. Banks in the PA area generally offer only short term credit such as overdrafts, LC's and bank guarantees. Average interest rates on loans in Israeli Shekels are 20-25 percent and 13 percent on loans in Jordanian Dinars. Recently, the Arab Palestinian Investment Bank (APIB) started conducting business in the Palestinian areas. It was established by the Arab Bank (55 percent of shares), the International Finance Corporation, the private investment arm of the World Bank (25 percent of shares), the German Investment and Development Company (DEG) belonging to the German Government (15 percent of the shares) and Enterprise Investment Company, owned by Palestinian businessmen (5 percent of the shares). Its capital amounts to twenty million US$ with the additional possibility of loans from the founders in the amount of US$ 35 million. The bank offers medium and long term financing of up to eight year periods and will also buy into the capital of new and existing companies. Loans will be in U.S. dollars linked to its value at the international market. Further, the bank will offer financial investment services and manage investment portfolios Bilateral Banking Agreements Israel, Jordan, Egypt and the Palestinian Liberation Organization concluded several bilateral agreements, some of which affect banking matters. The Central Bank of Jordan (CBJ) and the Israeli Controller of Banking (ICB) reached an agreement allowing Jordanian banks to open branches in the West Bank, after first seeking the approval of the CBJ and ICB. This agreement will be valid until superseded by action of the PMA. The Arab Land Bank reopened its branches in the West Bank pursuant to the terms of an accord reached between Egypt and Israel in May of 1993, subject to the supervision of the CBJ, ICB and the Central Bank of Egypt. Previous Chapter Contents Menu Next Chapter

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