Jordan’s Central Bank Downplays Impact of Local Computer Company Loan Fraud on Banking Sector
The Jordanian government dealt with the issue of a local Jordanian computer company, which failed to settle installments of loans extended to it by local banks and amounting to millions of JD with strict confidentiality. More than one Jordanian official declined to make any comment on the issue.
Prices at Amman’s stock market plummeted for the third day in a row amid press reports about a computer company failing to settle millions of JDs in loans due to local banks. In a statement, Jordan’s Central Bank downplayed the seriousness of the situation and announced measures it has taken to protect the banking sector in the country.
Rumors on the credit crises which four Jordanian banks are facing due to the failure of a local IT company to settle loans amounting to millions of JDs have led to concerns among investors in the stock market, and henceforth, declines in the stock prices.
The Central Bank considered the decline in prices of some stocks as unjustified in view of the limited amount of the credit facilities extended to the IT Company.
Press reports stated that stocks of three local banks, Bank of Export and Finance, Bank of Jordan and the Gulf and the National Bank of Jordan which extended the loans, of JD 20m, JD 8.5m and JD 44m, suffered heavy losses over the past few days indicating that the head of the Amman Stock Exchange, Bassam al Saket, sent massages to these banks asking for explanation for their stock prices dive.
While some press sources estimated the loans at JD 100-180 million, financial sources stated that the amounts were much less than that. The Central Bank, which began an investigation of the affair, stated that the amounts were limited compared to the total of five billion JD in loans extended by the local banks in 2001.
A Jordanian economist, who preferred anonymity, told Albawaba.com that Jordan’s Central Bank had earlier sent the lending banks a confidential memorandum calling their attention to the exaggerated volume of credit facilities they extended to the company. “The relevancy of the loans’ collateral might be the reason for suspicion,” the governor of the Jordan’s Central Bank (CBJ), Umayya Toukan told the Jordanian TV, adding that these facilities were extended to a number of known Jordanian businessmen.
Other sources stated the computer company owned by known figures including Majd Sami al Shamaylih and Nassir Salem al Masaadeh who are relatives to government officials had ceased settling three consecutive loan installments which were due. The first installment, the sources say, which was due three months ago exceeded 15 million JD while the second and third installments were few millions less than that.
The same sources stated that the failure of the company to settle the third installment which was due early this month led to rumors in the stock market and subsequently it sparked concerns among investors and resulted in the decline which hit the stock market prices.
Reports stated that some of the computer company executives fled the country, others dismissed these news reports as baseless rumors but the Central Bank statement did not tackle this affair in particular.
Press reports also stated that the Jordanian government had recently begun an internal investigation to assess the magnitude of the damage which this issue, the first of its type since what was known in the late eighties as Petra Bank issue, has inflicted on the kingdom’s banking sector. Albawaba.com
© 2002 Mena Report (www.menareport.com)