ABSTRACT
This chapter examines how well the privately owned banking system has served the Jordanian economy. Jordan is the home of one major Arab international bank, the Arab Bank, and eight primarily local banks which serve the domestic market. Since then it has expanded its operations on the East Bank, but it aims to serve the Palestinian community throughout the Arab world and overseas, not only in Jordan. Deposits and loans from local banks are of even less significance, illustrating the underdevelopment of the inter-bank market in Amman. Consequently, the banks have increasingly found it preferable to entice depositors by offering higher interest, but less liquid time deposits. The banks argue that some foreign asset holding is precautionary, given their foreign liabilities because of non-resident deposits. Under such circumstances, the Central Bank can exercise a considerable degree of influence over money supply growth by merely controlling the note issue, without having to monitor closely commercial bank finances.
