Regulatory Alerts2015-06-14
Industry Initiative Instructions
The Central Bank of Egypt's board of directors has approved a series of amendments to the structured lending system guidelines, which began on the issuance date of the bank's financial regulations and within a period of two years. According to article 3 of the Central Bank of Egypt’s Law No. 88 for the year 1966, the board may decide upon any amendments it deems necessary to be added to or subtracted from the system of lending rules and procedures. The approved changes include: - Reducing the maximum maturity period for structured loans and facilities (Article 3/2/5 and 8) - Increasing the supervisory role of banks on their borrowers in implementing the program, especially for those with a high concentration of deposits. This responsibility will be exercised under the oversight of the Central Bank of Egypt. - The Central Bank of Egypt will periodically study each borrower listed under the program and assess the capacity of employees to repay the loans and analyze future liquidity requirements needed to cover funding needs. - Quarterly reports on the borrowers registered in the program. - Within one year after the issuance date of this decision and annually thereafter, based on the applicable regulatory principles of the Central Bank of Egypt's Board of Directors, the system of guarantee fees for guarantees shall be reviewed, as well as the methods of calculating the interest rates applied to borrowers. The board also decided: - To require banks to coordinate with each other regarding implementing the program in order to avoid any conflicts that may arise due to the largest deposit holder. - Banks must conduct sensitivity tests on the impact of changes in key assumptions and the potential risks associated with such adjustments. - The Central Bank of Egypt shall supervise the implementation of the borrower’s recovery plan within a specified period and reduce the incentives for employees. These amendments come into effect from the issuance date of the financial regulations and remain in effect for a maximum period of two years, according to article 3/2/5 and 8) of Law No. 88 for the year 1966. The Central Bank of Egypt's Board of Directors has the authority to decide upon any amendments it considers necessary to be added to or subtracted from the system of lending rules and procedures according to article 3 of its own law. These changes are aimed at improving the efficiency of the banking sector while ensuring financial stability in light of the global economic crisis caused by the COVID-19 pandemic. They also aim at reducing any risks that might arise due to high levels of liquidity and large amounts of unsecured loans, which have been a major concern for many central banks around the world. The Central Bank of Egypt has displayed its commitment to maintaining the health of its banking system by taking these necessary steps toward ensuring financial stability within its jurisdiction.