Banking in Palestine, despite the country's declining economy and political instability, continues to grow and expand. But while customer deposits are increasing, bankers are concerned by the lack of real investment and lending opportunities. In a recent report by the Ramallah-based Palestine Monetary Authority (PMA), the banking sector appears to be relatively sound as the total assets of the 20 local and foreign banks in operation grew by 7.2% to reach $7.9bn at the end of September 2009, compared with $7.4bn at the end of 2008.
The sector also remains well capitalised and profitable. As at the end of September 2009, banks operating in Palestine had a capital adequacy ratio of 22.55% - only 12% is required by the PMA - and efforts by the PMA to increase capital have seen banks' paid-up capital double to $704m, compared with $316m at the beginning of 2006. The PMA has also increased the minimum capital requirement of banks to $50m for 2010 and aggregate capital is expected to rise to $900m by the end of this year.
