Regulatory Alerts2012-05-10
Dealing with retail and institutional loans in the post-revolution period
In response to the decline in tourism, we confirm that CBE will implement the following measures: 1. The Central Bank of Egypt (CBE) will take all necessary actions to ensure the stability and resilience of the banking sector, including providing liquidity support and ensuring the smooth functioning of money markets. This includes monitoring and coordinating with other regulators as needed to maintain financial stability. 2. As for the restructuring of foreign-currency loans, CBE will continue working closely with the competent authorities such as the Ministry of Finance, the Financial Regulatory Authority, and the Egyptian Banking Institute on the development of a comprehensive plan, including: a. Assessing the impact of the tourism decline and the restructuring measures on the financial position of banks, taking into consideration any negative or positive effects that may result from such measures. b. Consideration should be given to extending the grace period for repayment of loans by up to six months (from January 2021 till the end of June **2021**) and considering them as grace periods to alleviate negative effects on the banks and avoid recording such facilities as unplanned. c. Banks should continue to provide regular financial statements to the Egyptian Stock Exchange for credit institutions, particularly in relation to the affected sectors. 3. CBE will also carry out stress tests (Testing Stress) at all levels of loan portfolios and liquidity buffers. Various scenarios can be tested for the purpose of assessing the bank's vulnerability to various shocks and adverse events, including specific scenarios related to the investment portfolio or the quality of customer loans, and developing contingency plans for handling potential negative consequences. This should also include an assessment of how these scenarios affect key financial indicators such as capital adequacy ratios, profitability measures, and others. In summary, CBE will closely monitor and coordinate with the regulatory authorities to assess the impact of the tourism decline and loan restructuring on the banking sector and its resilience, taking necessary actions to maintain financial stability and ensuring that appropriate contingency plans are in place to mitigate potential negative consequences.