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The Second Regional Conference on "The Role of Deposit Insurance in Promoting Financial Stability in the Middle East and North Africa: Enhancing Confidence" was opened under the patronage of HE Dr. Umayya Toukan, the Governor of the Central Bank of Jordan / the Chairman of the Board of Directors of Jordan Deposit Insurance Corporation JODIC).
The conference was organized by JODIC in cooperation with the International Association of Deposit Insurance (IADI) and the Financial Services Volunteer Corps (FSVC) at the Le Meridian Hotel - Amman during the period 18-20 November 2009. About 120 experts and practitioners from regional and international deposit insurance corporations, the International Monetary Fund, the World Bank and officials from the Arab central banks have participated in the conference.
Various topics were addressed in the conference; one of the most important is the impact of the global financial crisis on the economies of the Middle East and North Africa region as the decline in economic growth, commodity prices, real estates, investments and exports, increase of unemployment rates, decline in the financial markets and the difficulty of obtaining funds.
The Conference highlighted the important role of deposit insurance in enhancing financial stability, protecting small depositors, and strengthening the confidence in the banking system as a member in the financial safety net. Many countries in the region are considering the development of a deposit insurance system, which specifies the responsibility of the authorities toward depositors, sets coverage limits, strengthen the confidence of depositors and contributes in reducing the cost of troubled banks resolution, as well as providing a systematic mechanism to deal with bank failure.
The conference addressed MENA region countries responses to deal with the global financial crisis by adopting several fiscal, monetary and financial policies such as decreasing interest rates, injecting liquidity in the market, providing financial assistance to banks and initiating temporary blanket deposit insurance guarantees such as Jordan, United Arab Emirates and Kuwait. At the international level, 47 countries in the world adopted or modified their deposit insurance systems either through insuring creditors or increasing the coverage limit (in 21 countries) or providing a blanket guarantee (temporarily in 19 countries for a period ranging between one and three years).
On the other hand, the main features of deposit insurance systems were discussed; in terms of funding arrangements, funds investments, membership fees, limit and scope of coverage, reserve sufficiency and its evaluation, through information sharing and the exchange of experiences between countries.
One major area was addressed in the conference is the transitioning mechanisms from blanket guarantee to an explicit one, its prerequisites, timing of transitioning and the potential trade-offs and risks during transitioning. Cooperation between financial safety net members in a country as well as sharing information and exchanging experience between other countries should be considered in order to ensure a smooth transition and to maintain public confidence in the financial system.
The conference included a special session about insuring Shariah-based deposits, their definition, objectives, the permissibility of Islamic deposit insurance from Shariah perspective, Islamic banking distribution in the world and the challenges that are exposed. The experiences of Malaysia, Indonesia and Sudan were highlighted in this regard.
The final area addressed was the establishment of an effective deposit insurance system based on IADI/BCBS core principles through sound governance, specified mandates and responsibilities and interrelationships among financial safety net participants as well as the coordination of deposit insurance systems.
: The following are the papers that were presented at the conference
1. The Effects of the Global Financial Crisis on the MENA Region:
2. Funding and Coverage Limit:
3. The Risk Based Premiums:
4. Transitioning from Blanket Coverage to Limited:
5. Insuring Shariah Based Deposits:
6. Structured Issues Related to Effective Design for Deposit Insurance:
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