Jordan renews bank deposits guarantee until 2010

AMMAN, Nov 4 - Jordan has extended a guarantee of all deposits in its banks beyond this year until end of 2010 to shore up confidence in the banking system, Prime Minister Nader Dahabi said on Wednesday.

Dahabi told bankers at a meeting in the Central Bank of Jordan the government would again extend last years' guarantee of private commercial deposits to mitigate the global downturn's impact on the aid-dependent economy that has slowed down growth and domestic consumption.

"This was one of the pre-emptive measures to ease the impact on the economy and it is part of the government's responsibility ... as much as it confirms our confidence in the performance of banks," Dahabi was quoted as saying by the state news agency Petra.

The country's 23 commercial banks have had minimal exposure to Western markets, and a strong supervisory system run by an independent central bank has limited their currency, property and stock market exposure.

Total deposits, mostly dinar-denominated assets and the bulk comprising mostly private but also public funds, stood at 19.462 billion dinars in July last year, according to Central Bank of Jordan data.

The well-capitalised banks had seen loan growth outpacing that of deposits during a boom period that saw years of rapid credit expansion, when the country's free-market reforms attracted billions of dollars of investments by both local and foreign investors, bankers say.

The CBJ has traditionally maintained a high interest rate policy to preserve the attractiveness of dinar-denominated assets and to hamper any excessive outflow of dinars into dollar denominated assets.

Dahabi said to guarantee the supply of liquidity, the CBJ softened monetary policy at the outset of the crisis last year by halting issues of certificates of deposit, cut compulsory requirements on commercial deposits and reduced rates to free up funds for lending to spur economic growth.