There are three key capital market institutions: the regulator, Jordan Securities Commission (JSC); the exchange, Amman Stock Exchange (ASE); and the custodian for all transaction contracts, clearings, and settlements, Securities Depository Center (SDC). The 2002 Securities Law brought the law in line with international best practices. In 2011, the ASE modernized its technical infrastructure, enhancing the dissemination of information. It launched the Internet Trading Service in 2010, providing an opportunity for investors to engage in securities trading regardless of geographic location. Investors, both foreign and domestic, are permitted to open margin accounts and to engage in short-selling. Commercial banks hold securities for their clients in a sub-account format.
In spite of recent reforms and technological advances, the ASE suffers from intermittent liquidity problems and decreased trading activity. The bourse remains prone to speculative movements. The ASE's market capitalization has grown and shrunk rapidly and repeatedly since 2003. The ASE price index lost 1.85% percent in 2015 reaching 2,136 at year end. Trading volume increased by 13.6 percent to 2.5 billion from 2.2 billion shares in 2014. The number of listed companies stood at 228 at the end of 2015 compared to 236 at the end of 2014. The market capitalization of listed shares at the ASE amounted to USD 25.4 billion, equaling 66.4 percent of GDP.
Money and Banking System, Hostile Takeovers
Due to strict regulations on lending, particularly mortgage lending, and limited integration with global financial markets, Jordanian banks were reasonably resilient to international shocks. The banking sector's indicators remain strong; banks continue to be profitable and well-capitalized, and deposits are still the major funding base. Liquidity ratios and provisioning remain high, non-performing loan ratios modestly decreased over the past couple of years. The CBJ in December 2010 directed Jordanian banks to maintain a minimum JOD 100 million in capital and raised the requirement for foreign banks to JOD 50 million. Jordan does not distinguish between investment banks and commercial banks. Jordan has 25 banks in total, including commercial banks, Islamic banks, and foreign bank branches.
Banks in Jordan offer loans, discounted bills, and overdraft facilities. The CBJ permits banks to extend loans and credit facilities in foreign currency, but only for exporting purposes. In such cases, it requires debt repayment to be in the same foreign currency. A number of banks have offshore mutual funds to avoid Jordanian taxes.
The Banking Law protects depositors' interests, diminishes money market risk, guards against the concentration of lending, and includes articles on electronic banking practices and money laundering. The Credit Information Law was passed as a temporary law in 2010 laying the groundwork for the establishment of a credit bureau. In 2015, the Central Bank of Jordan selected CRiF as a strategic partner on this project. CRiF recently launched their operations in Jordan and are expected to start issuing reports in the second half of 2016.
The CBJ set up an independent Deposit Insurance Corporation (DIC) in 2000 that initially insured deposits up to JOD 10,000 (USD 14,000). DIC currently insures deposits up to JOD 50,000 (USD 71,000) and is expected to maintain the guarantee for the foreseeable future. The DIC also acts as the liquidator of banks as directed by the CBJ. The CBJ established a credit bureau for bounced checks in 2001 which requires banks to report the names of account holders with bounced checks. Following the report of one bounced check, the CBJ circulates the names of the account holders to all banks with recommendations to carefully evaluate the account holders' access to banking services.
The Central Bank of Jordan (CBJ) conducts regular government debt auctions of differing maturities on behalf of the Ministry of Finance. Treasury auctions traditionally take place on a monthly or biweekly basis, depending on maturity. The government issues development bonds as necessary. Treasury bonds to the tune of USD 5 billion and Treasury bills valued USD 70 million were issued in the local market in 2015.
Foreign investors are allowed to participate in auctions and to purchase government securities through banks. Over the past few years, Jordan has successfully issued several Sovereign Eurobonds, independently and with U.S. loan guarantees, as well as domestic bonds in dollar as of November 2015 total outstanding amount was $5.4 billion
The corporate bond market remains underdeveloped and continues to be overshadowed by traditional direct lending, primarily due to the absence of proper mechanisms for corporate debt creation. A few banks, however, are introducing new products and facilitating corporate bond issuances.
In 2010, Jordan amended its existing Anti-Money Laundering Law to comply with Middle East/North Africa Financial Action Task Force (MENAFATF) standards. Among other things, the 2010 amendments extended the range of predicate offenses to include certain crimes that would otherwise qualify as misdemeanors, whether those offenses are committed in Jordan or abroad. The amendments also created a legal framework to address terrorist financing. As such, the law was renamed the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) Law, and the existing financial intelligence unit renamed the AML/CFT Unit. The CBJ as well as other financial sector regulators are implementing the AML/CFT Law further through the issuance of circulars and other regulations under their own authority.
There are a number of internationally-recognized accounting and auditing firms in Jordan. The government's accounting and auditing regulations are consistent with international standards and are internationally recognized.