Circular No. 8810/10 dated 2005/8/10 regarding Islamic Banks' ownership of shares and stakes in corporate capital for risk control purposes

Circular No. (8810/10) dated 2005/8/10

Regarding the ownership of available Islamic shares by Islamic banks for the purposes of risk control

And in light of the provisions of Articles (3, 37/b, 38, 51, 52, 54, 88/4/b) of the Companies Capital Law,

And relying on Article (28) of the Banks Law No. (2) of the year 2000,

I have decided the following:

First:
The following percentages apply to investments by Islamic banks in shares and stakes in companies funded from joint investment accounts:

1. An Islamic bank may not own a total sum of shares and stakes in the capital of all companies funded from joint investment accounts that exceeds 75% of the bank's regulatory capital, whether directly or indirectly.

2. An Islamic bank may not own shares or stakes funded from joint investment accounts in the capital of a single company that exceeds 5% of the bank's regulatory capital, whether directly or indirectly.

3. In the case of combining the granting of credit facilities with investment in any company, the total maximum credit facilities granted by the Islamic bank to the single company, whether directly or indirectly, must not exceed 20% of the bank's regulatory capital, and must not exceed the amount listed in point (2) above in the capital of the single company. The provisions of our memorandum No. (9/2001) dated 2001/8/1 regarding credit facilities apply to credit facilities.

Second:
The instructions of the Central Bank regarding the ownership of shares and stakes in the capital of companies by banks, No. (12/2002) dated 2002/12/3, apply to investments by Islamic banks in shares and stakes in the capital of companies funded from the bank's own funds.

Third:
The provisions of the instructions of the Monetary Authority regarding the maximum limits of financial exposures apply, according to Circular No. (21/2005) dated 2005/8/7, in any case where an Islamic bank exceeds the limits stipulated in the first and second parts above.

Fourth:
These instructions are considered effective from their date.