Raising or lowering the interest rates on individuals’ loans is done through a specific mechanism in line with instructions on transparent and fair treatment of consumers issued by the Central Bank of Jordan, an ABJ statement said yesterday.

All banks working in Jordan are committed to those instructions, which are clarified and explained to customers in the agreement they sign with the bank, it went on to say.

The statement came to refute accusations in the media that some banks acted in advance of an anticipated decision by the CBJ to raise the interest rates. The statement described those accusations as “inaccurate,” as raising the interest rates was in line with contractual obligations earlier concluded with some borrowers.

As regards claims that borrowers enjoy no protection, the ABJ said banks cannot raise interest rates on borrowers automatically, as changing interest rates is limited to a specific number of times with which the bank is obliged and it is determined by contracts according to instructions and laws in force.

The ABJ insisted that banks have never raised interest rates except within mechanisms specified by CBJ instructions.

In this regard, the ABJ stressed that the imperative factor that banks observe in their banking actions is the genuine interest rate margin, which reflects all financing costs of mandatory reserves, non-performing loans and the cost of deposit guarantees. The present average of the genuine interest rate margin is 3.24%, a low margin compared with those of banks working in the region, according to an in-depth study the ABJ recently conducted.

Therefore, the ABJ said, “raising the interest rate aims to maintain the interest rate margin between the interest rates on deposits and loans. The end beneficiary of this action is the depositors, it added.