Guiding controls for approving requests to open new bank branches/agencies

Dear Mr. Chairman of the Board of Directors,

Greetings,

In accordance with the policy of the Central Bank of Egypt to encourage the growth and expansion of banks through the opening of new branches in various areas of the Republic, the need has become urgent to review the currently applied standards to organize and facilitate the approval procedures for opening new bank branches/agencies and to set guiding controls that take into account the soundness of the financial position and internal control systems of banks applying to open new branches and their capital adequacy to face the risks resulting from the increase in the volume of activity.

In addition to the necessity of complying with the provisions contained in Central Bank and Monetary Authority Law No. 88 of 2003 regarding the opening and registration of bank branches and agencies, including considering the general economic interest and the special circumstances of the area where the branch/agency is to be established, banks should, in addition to opening branches in major cities, increase their attention to providing banking services to deprived areas or areas where branch presence is low, which limits the concentration of bank branches in limited areas.

Based on the foregoing, the Board of Directors of the Central Bank of Egypt, in its meeting held on June 3, 2008, approved the attached guiding controls which banks must comply with when submitting applications to the Central Bank of Egypt to open new branches, and which will be applied with flexibility according to the circumstances of each case. Since the Central Bank of Egypt requires banks to observe these guiding controls when submitting their applications, the need is clear for banks to formulate policies for expansion across the areas of the Republic.

Please accept our highest respect,

Gamal Naguib

The Guiding Controls issued by the Board of Directors of the Central Bank of Egypt in its meeting held on June 3, 2008 For the approval of requests to open new branches/agencies for banks

1. The Quantitative Aspect:

Determining the maximum number of branches allowed for any bank (including existing branches, branches for which Central Bank approval was obtained but not activated, and branches planned to be opened from January to December of the current year) based on the value of the bank's basic capital - according to the balance sheet of 6/30 approved - for each bank, taking into account any subsequent material events, and allocating an amount of 20 million Egyptian pounds of the bank's basic capital for each branch.

2. The Qualitative Aspect:

Considering the extent of the bank's compliance with laws and regulatory instructions and the implementation of corrective measures, and in particular the following:

• The minimum standard of capital adequacy.
• The basis for evaluating the creditworthiness of customers and forming the necessary provisions.
• Balance limits in currency positions.
• Concentration ratios regarding the bank's investments abroad.
• The bank's investments with a single client and related parties and parties related to the bank.
• The results of the last inspection conducted on the bank by the Supervision and Inspection Sector of the Central Bank.
• The most important observations contained in the auditors' report.

Confirming that the bank's general strategy clarifies the objective of opening new branches.

The bank's seriousness in implementing the approvals obtained in the previous year prior to opening new branches.

Confirming that the bank seeking expansion has a Business Plan approved by its Board of Directors and submitted to the Central Bank of Egypt, including the following elements at a minimum:

• A specific plan for the human resources required to manage and operate those branches and sources to meet those needs, whether from within the bank or outside it. In any case, the bank must provide proof of meeting the required needs.
• An economic and feasibility study for the expansion plan in establishing new branches and its impact on the bank's revenues and profits.
• A presentation of the activities that the new branches will practice and the new products they will market, along with the amount of risks associated with them and how to control them.
• The need of certain areas for new banking branches, meaning that the new branches requested to be opened are in deprived areas or areas where banking services from competing banks are scarce, with priority given to branches outside Greater Cairo and Alexandria.

(2)

The existence of a competent and effective risk management department commensurate with the size and nature of the bank's activities.

The effectiveness and competence of the bank's internal control system to control current and future risks.

Considering the adequacy of the capital base for current and potential risks resulting from opening new branches.

Evaluating the bank's information and technological infrastructure to absorb new branches efficiently and effectively.

3. The Organizational Aspect:

1. Banks shall submit applications for opening new branches during the month of September only of each year, and applications for opening new branches for the following fiscal year (January - December) will not be accepted after this date. The Central Bank shall respond to bank applications in December of the same year.

2. Banks that previously submitted applications to the Central Bank of Egypt to open branches for the year 2008 must meet the required qualitative controls and submit them to the Central Bank by July 15, 2008, and the Central Bank shall respond in September 2008.

3. Documents and Information Required from Banks:

• A letter authorized by the Chairman of the Board of Directors of the bank / the Executive Member or the Chief Executive Officer of the foreign bank branch, stating the number of new branches requested to be opened and the reasons for this, and confirming the existence of basic capital - according to the approved balance sheet of 6/30 - to cover those branches.

• A detailed statement of previous approvals for opening new branches, stating what has been implemented from them and the reasons for non-implementation, supported by documents and the expected new implementation date.

• The corrective measures approved by the Board of Directors of the bank to address the observations contained in the inspection report on the bank.

• The bank's Strategy and Annual Business Plan, including all the elements previously mentioned under the title "The Qualitative Aspect" above.