First: The establishment

Deposit Insurance Corporation is a public entity with financial & administrative independence. It was established by the virtue of Law No. 33 of 2000, aiming at protecting depositors with banks in the Kingdom by insuring their deposits according to the provision of the law, so as to encourage saving and to strengthen the confidence in the banking system in the kingdom.

The Corporation was launched in line with the international contemporary changes in the structure of the banking sector. Currently, there are approximately 100 countries adopting explicit deposit insurance systems compared to only twelve countries in the mid-seventies that had deposit insurance systems.

The acceleration in the international financial landscape, particularly during the last ten years, reflects the global acknowledgement of the vital role that deposit insurance can play in promoting financial stability and achieving other critical macro-economic objectives. The most important of which are the activation of market competition in the banking sector, the preservation of public funds and the development of legal institutional mechanism to deal with banks' failure. Given the critical role of the banking sector, the ultimate object of the Corporation is to strengthen the confidence in kingdom's banking sector to encourage savings and enhance economic growth

The establishment of the Corporation in Jordan became an integral step in the enhancement of the banking safety-net that is entrusted with the financial stability. The function of deposit insurance is to support other fundamental functions of the Central Bank of Jordan (CBJ) which are related to banking supervision and the role of depositors in monitoring the financial position of banks. This will enable banks to participate effectively in financial intermediation and economic growth.

In its pursuant to address such challenges, DIC is currently aligning its functions and operations on  a strategic track to realize its vision in being a leading professional risk minimizing organization  that promotes the stability of the Jordanian financial system. Consequently, DIC acknowledges  that the realization  of such vision  depends  on crucial duties which need to be effectively executed and accomplished.

In this regard, DIC will be focusing its efforts at the following:

1.   Implementing and managing an explicit- limited deposit insurance scheme in accordance with the best international practices and interacting with professional agencies in deposit insurance schemes thereby to protect depositors and DIC's resources.

2.   Disseminating on a continuous basis the risk management culture to be implemented in professional manner across all DIC operations and functions as well as enhancing the coordination among safety- net participants.

3.   Providing  efficient exit- policy through developing a clear, legal and formal mechanism for dealing with failed banks as well as providing  prompt reimbursement against the loss of part or all of insured deposits through a formal and efficient pay-out mechanism.

4.   Disseminating on a continuous basis the themes underpinning  explicit- limited deposit insurance scheme and identifying the primary responsibilities required through  a public awareness campaign, especially encouraging depositors and other related parties to monitor and take their rational investment decisions according to the soundness of  financial conditions of banks.

Second: General Information

DIC Vision

DIC Mission

Objectives

The DIC's key objectives are to implement and manage an explicit- limited deposit insurance scheme in order to protect depositors as well as DIC's resources.

The Corporation's main objectives are:

1.   Provide consumer protection to small depositors through a mechanism of immediate pay-out of the insured deposits.

2.   Enhance public confidence and system stability by establishing a framework for the resolution of failed banks.

3.   Increase savings and encourage economic growth.

4.   Enable small and new banks to compete with large banks.

5.   Limit the government's vulnerability to loss when a bank or group of banks fail.

6.   Require member banks to contribute to the cost of resolution of failed banks.

Main Features

The main features of deposit insurance scheme in Jordan are: 

1.     Public- Policy Objectives

Protecting depositors with banks by insuring their deposits in accordance with the provisions of DIC's law in order to encourage savings and strengthen confidence in the banking system.

2.     Membership

a.  Compulsory: All Jordanian Banks and branches of foreign banks operating in the Kingdom, excluding branches of Jordanian banks operating outside the Kingdom.

b.  Voluntary: Islamic Banks licensed to operate in the Kingdom.

3.     Coverage

1.  Limit : A maximum of JD 50,000 (Fifty thousand Jordanian dinars) insurance coverage*

2.  Currency: Jordanian Dinar.

3.  Deposits  : Total deposits excluding : 

a.    Government deposits.

b.    Interbank deposits.

c.    Cash collaterals.

4.     Fund Target- Ratio

   In order to be able to meet its obligations stem from its role as insurer and sole liquidator, DIC must act to form funds (reserves) for itself amounting to 3% of total deposits subject to DIC's law.

5.     Funding

a.  Capital: Capital consists of JD 1 million paid by  the government and JD 100,000 paid by each member bank.

b.  Ex-ante Funding

1.    Annual premiums paid by member banks at a rate of 2.5 per thousand  of the total deposits subject to DIC's law.

2.    Board of Directors may increase the annual premium to no more than one double if the Central Bank of Jordan (CBJ) finds, based on the applicable rating rules, that the degree of risk assumed by a bank has become unacceptable.

3.    Rules for calculating premiums can be changed after rating member banks subject to approval of Council of Ministers.

c.  Ex-post Funding

1.    The Board may increase the annual premiums to no more than one double, subject to DIC law.

2.    Borrowing capacity: the corporation may borrow directly or by issuing debenture bonds.

6.     Investment of funds

Funds are invested in bonds issued or guaranteed by the Government of Jordan, it may also invest its funds in deposits with the central bank.

7.     Governance Structure

a.  Publicly sponsored and administrated, but privately financed.

b.  Managed and supervised by a Board of Directors chaired by the Governor of the Central Bank.

c.  Enjoys a corporate entity status with financial and administrative independence.

8.     Powers

a.  Reimbursement of depositors

1.    The insurance limit becomes payable if the CBJ decides to liquidate a member bank.

2.    The insurance sum should be paid to the insured depositor within 30 days from submitting a deposit claim.

b.  Liquidation

1.    The sole, legal representative of any bank whom liquidation has been decided by CBJ.

2.    Must complete liquidation proceedings within two years, and may be extended –for justified reasons- on  yearly basis.

c.  Regulatory and supervisory duties

1.    The DIC may examine banks' annual financial statements and the results of their operations that are available at CBJ.

2.    Upon CBJ approval, a joint inspection team to examine any bank conditions  can be formed from the employees of DIC and CBJ.

d.  Intervention and Failure resolutions

9.     Bank Secrecy- Confidentiality

Board of Directors and employees of the DIC must maintain full confidentiality regarding all statements or information which they examine.

* The coverage limit has been increased from JD (10,000) to JD (50,000) affective 1st of January 2011 based on the Cabinet decision dated 5/12/2010.