Regulatory Alerts2016-06-08
A circular dated June 8, 2016 regarding the detailed memorandum on the initiative for medium-sized companies operating in the fields of industry and agriculture.
The Central Bank of Egypt (CBE) has issued a statement outlining the new mortgage finance mechanism to be implemented in coordination with commercial banks and the Egyptian government. Below are the key points: 1. From January, April, July, and October 2023, the Central Bank will deduct 5% of the outstanding balance on each loan installment due on any date within the month. This will apply to all new mortgage loans disbursed by commercial banks from May 1, 2023. 2. The total amount deducted from the borrower's monthly payment for this purpose will not exceed 4% of the total value of the loan. 3. Beginning January, April, July, and October 2023, the Central Bank will make a 5% annual deduction in favor of each bank based on their outstanding loans to commercial banks and the government's public sector, as well as administrative and other expenses, subject to applicable taxes under current laws. 4. Effective January 1, 2023, the maximum interest rate charged by banks for mortgage financing will be lowered from 5% to 4%. This reduction in interest rates is subject to amendments in the applicable tax legislation. 5. If a borrower defaults on their loan installments and the second-stage rescheduling plan is implemented, the bank shall have the option to extend repayment and apply the outstanding dues. Repayment may be postponed in accordance with state policies. 6. In case of an emergency or if the Egyptian government declares a state of war or a major disaster, banks may be allowed additional leeway on rescheduling loan installments and applying outstanding dues. This will be subject to approval by the Central Bank. 7. The supervisory authority and regulatory authorities will closely monitor the implementation of the monthly deductions mechanism. They will ensure that all relevant data, which is similar to the real estate finance system introduced in January 2014, will be recorded on the specified template. It should be noted that the electronic payment mechanism being used by commercial banks is very similar to the electronic mortgage financing system introduced in January 2014. Banks may seek assistance based on their previous experience with the electronic mortgage financing system from May 1, 2023."