Report: Bank al-Istiqlal for Investment and Development — 2022

(Episode Four) from the annual report of the Bureau for the year 2023

· Before presenting the violations that appeared in the annual report of the State Audit and Administrative Control Bureau (SAACB) for the year 2023, during the establishment and operational stages of Bank al-Istiqlal for the year 2022, we summarize below a brief profile of the said bank:

· Brief profile of the bank :

- Bank al-Istiqlal for Investment and Development, is a Palestinian government bank established on 10 February, 2021, pursuant to (Decree-Law No. (5) of 2021), and the main objective of establishing the bank is to advance investment and development toward economic and social progress, to broaden the productive base of the national economy, and to create effective mechanisms to manage project accounts, government funds, and any other projects or funds that the Council of Ministers decides to create and to assign the bank to manage, in addition to contributing to improving the digitization and collection of government revenues, and others.

- The bank is managed and supervised by a Board of Directors composed of eleven members who are all appointed by decision of the Palestinian Council of Ministers, such that seven of them, including the board chairman, are representatives of the public sector, and four are independent members, for a term of three years renewable once only; the board also elects from among its members a Vice Chairman of the Board with the relevant expertise.

- The first Board of Directors at the bank’s establishment included the Palestinian Prime Minister (at that time), Dr. Mohammad Shtayyeh, as Chairman of the Board of the Bank, and as of 20 October 2022 the Palestinian Minister of Social Development (at that time) Ahmed Majdalani became Vice Chairman of the Board of the Bank, after his election during the bank’s third Board meeting; Mahdi Hamdan holds the position of General Manager of the bank, and the Board of Directors (at that time) included the Minister of Labor (at that time) Nasri Abu Jaish, the Minister of Agriculture (at that time) Riyadh Attari, the Minister of National Economy (at that time) Khaled al-Usaily, the Minister of Higher Education and Scientific Research (at that time) Mahmoud Abu Mweis, and the President of the Federation of Palestinian Chambers of Commerce, Industry and Agriculture (at that time) Omar Hashem; it was noted that the Board of Directors of Bank al-Istiqlal for Investment and Development, (at that time), lacked any representation of women!.... I tried to find the names of the current Board members, if any change had been made from the above, on the bank’s website, but I did not find any name except the name of the bank’s General Manager..!

- On 16-1-2024 Bank al-Istiqlal for Investment and Development announced the start of its actual activity by launching a financing instrument for small and medium enterprises.

· disclosure and transparency at the bank:

- Although the principles of disclosure and transparency are stipulated in the bylaws and the conditions for establishing Bank al-Istiqlal (governance principles) # the State Audit and Administrative Control Bureau (SAACB) report on the bank for the year 2022 presented several clear violations, which showed non-compliance by Bank al-Istiqlal with the laws establishing the bank, in the SAACB annual report for the year 2023!

- We present below some of those clear violations in the bank’s founding stages and its emergence as follows:

· Violations of Bank al-Istiqlal for Investment and Development since its inception and during its formation stages (Report on the bank for the year 2022):

1- Regarding the bank’s licensing: The license to engage in final financing lending activity for the bank was obtained from the Palestine Monetary Authority (PMA) on 5-3-2023, before the Ministry of Finance paid the bank’s capital as required by law..!

2- Board meetings: Only four Board meetings were held during 2022, contrary to Article (6) paragraph (1) of Decree-Law No. (5) of 2021 concerning Bank al-Istiqlal for Investment and Development, and contrary to instructions issued by the Palestine Monetary Authority in this regard on the Guide to Rules and Best Practices for Bank Governance, which requires, according to the Bank al-Istiqlal law, that a meeting be held at least once every month..

3- The Board of Directors did not adopt policies and procedures to prevent conflicts of interest among its members!

4- The Board of Directors did not appoint deputies, or a deputy to the bank’s General Manager, or advisors, or experts, to assist in managing the bank’s affairs, contrary to the banking governance principles issued by the Palestine Monetary Authority!

5- The bank’s capital was not paid in compliance with the laws and regulations of the Palestine Monetary Authority, pending completion of the auditing process, despite being one of the most important conditions and requirements for licensing!

6- Main office lease of the bank: The main office was leased based on a recommendation from the General Secretariat of the Council of Ministers to the Central Leases Committee, and not based on technical studies of the bank’s needs and price offers, as is customary in the committee’s similar leasing procedures.. where approval of the leasing process issued by the Council of Ministers was given based on a recommendation from the General Secretariat of the Council of Ministers to the Central Leases Committee!

7- The cost of using the building is higher than the approved rental value! (referring to the agreement concluded with the lessor company)

8- Charging the costs of the bank’s internal finishes (the tenant) was divided into four installments under the signed agreement by the Ministry of Finance, where there is no appropriation for this bank by the Council of Ministers nor the Central Leases Committee, and without deducting it from the annual rent as is customary in similar investment operations!

9- general budget and the need for experts: The actual need was not taken into account when preparing the bank’s general budget, resulting in a large gap between the budget and budget execution!

10- Bank al-Istiqlal for Investment and Development did not in 2021 submit a list of its annual needs for local and foreign experts and the positions it needs!

11- General supplies: General supplies were not posted on the supplies and assets register; instead an Excel sheet was used to record supplies..!

· As citizens, followers and specialists, how we wished that the establishment of such a government bank would be a new nucleus and energy to advance the national economy across all its sectors, in compliance with laws and regulations, mindful of justice, transparency, and governance principles, and far from any violations... but we were surprised by the existence of some violations according to the SAACB report, hoping that what can be corrected will be corrected.. and that violators will be held accountable according to the rules and governing legislation.., and that governance principles will be strengthened!