West Bank and Gaza: Promoting financial stability through the establishment of a Deposit Insurance Scheme (DIS)
FIRST's initial support in the needs assessment for a Deposit Insurance Scheme (DIS) in West Bank and Gaza in 2009 has laid the foundation for the fully functioning DIS today.
A review of the banking sector by the World Bank in June 2008 underscored the vulnerability of the banking sector, due in part to the domination of foreign banks, which held nearly 40 percent of deposits and 65 percent of loans, and the absence of national currency, which posed interest rate risk and transfer risks. Given these structural risks and the growing amount of savings captured by the banks, the establishment of a DIS became a critical issue to address in West Bank and Gaza.
Responding to a request from the Palestinian Monetary Authority (PMA), FIRST funded a consultant to conduct a feasibility assessment and to produce a preliminary design of the proposed DIS and an implementation plan. The work was well received by the authorities. On the basis of the feasibility report and other analytical works, the PMA decided to embark on the implementation phase of this project. The World Bank supported it with a TA grant of $5.2 million under the Capacity Building for Palestinian Economic and Regulatory Institutions program. This TA grant included a component that focused specifically on the establishment of a DIS, the drafting of the necessary legal framework (the DIS law and amendments to the banking law and trade law; also, design of the statutes and a suitable governance framework, and a set of relevant regulations), the development of DIS operational procedures, and a public awareness campaign.
In May 2014, five years after the feasibility assessment, the DIS officially became operational. The PMA has put in place all of the conditions recommended for this establishment, including the following:
- The new Palestine Deposit Insurance Corporation (PDIC) law was approved through a presidential decree on May 29, 2013, setting the legal framework for establishing the PDIC in accordance with the best international standards and providing coverage of approximately 93 percent of bank depositors in the West Bank and Gaza.
- The Board of Directors of the PDIC has been established and is chaired by Dr. Jihad Al Wazir, the PMA governor.
- In November 2013, the PDIC was accepted as a full member of the International Association of Deposit Insurers.
- As of April 2014, the PDIC had collected more than $20 million in premiums from both commercial and Islamic banks.
In May 2014, the PDIC launched its website in Arabic to provide the public with information on deposit insurance, its objectives, and its merits (http://www.pdic.ps). This was followed by the launch of a huge awareness campaign in West Bank and Gaza, featuring the installation of billboards in most major roads, as well as informative posters in banks and advertisements in print, audiovisual, and electronic mass media bearing the slogan, "Your Money Is Safe, We Insure It."