Regulatory Alerts2014-09-29
Disclosure of the actual annual rates of return
On September 18, 2014, the chairman of the board of Banco de Egypt announced that the bank would continue not to abide by the Basel III requirements. He stated this decision was made after the approval from the Central Bank's board meeting on September 16, 2014, to maintain the current effective interest rates on customer loans. The statement comes amid the Egyptian Central Bank's commitment to enhancing consumer protection in the banking sector, increasing client trust, and developing the comprehensive balance sheet. The board decided not to apply Basel III requirements as stipulated by article 40 of the Central Bank, the monetary and banking regulation (article 17), which obliges banks to fully disclose interest rates and service fees' effective annual percentage rates for the services they provide. This decision requires banks to agree and apply effective annual interest rates on customer loans (Annual Percentage Rate Effective or APR) when contracting with certain suppliers, as these suppliers need loans to procure goods and services, which in this case requires a contract that specifies interest rates, its application, and disclosure. The regulation also forbids contracting or applying discounted or non-disclosed rates by banks or suppliers.