Regulatory Alerts2020-02-18
A circular dated February 16, 2020 regarding amending the ratio of real estate financing to the total loan portfolio
The Central Bank of Egypt has issued a new circular allowing banks licensed with the Central Bank to engage in mortgage financing activities. This comes as part of efforts to stimulate real estate investment and contribute to economic recovery following the pandemic's negative impact on various sectors. The move is designed to encourage and increase the flow of credit towards mortgage finance for the construction, purchase, or improvement of residential buildings, commercial offices, and facilities designated for commercial use. Banks will have to adhere to several guidelines including maintaining a sound capital adequacy ratio and not exceeding 0% of the total bank loans. The circular mandates that banks report their mortgage financing activities quarterly, and these reports should be submitted to the Central Bank no later than one month after the end of each fiscal year. The Central Bank will continue to monitor this area based on data already being reported by banks. In summary, the Central Bank is encouraging banks to engage in mortgage financing activities while adhering to strict guidelines. This move aims at stimulating real estate investment and contributes to economic recovery after the pandemic had a significant negative impact on various sectors.