Circular dated December 14, 2021 regarding the temporary amendment to the treatment of non-performing loans for small and medium-sized companies in accordance with the instructions of International Financial Reporting Standard No. 9

Cairo: December 14, 2021

To: The Chairman of the Board
Greetings,

With reference to the Circular dated February 26, 2019, regarding the application of International Financial Reporting Standard No. 9 (IFRS 9), and in light of the continued repercussions of the coronavirus crisis and its impact on various economic sectors, specifically small and medium-sized companies, on their ability to meet their obligations to banks, which may increase the probability of accumulating debts and defaults on them, and with the aim of alleviating the burden on this segment of companies and supporting them to continue working, producing, and preserving employment, the Board of Directors of the Central Bank of Egypt, in its meeting held on December 7, 2021, has decided the following:

First: Regarding Small and Medium-Sized Companies:

1. Customers shall be classified in Stage 3 in case of non-compliance with contractual conditions, in case of receivables equal to or exceeding 180 consecutive days (instead of 90 days according to current instructions).

2. Regarding customers previously classified in Stage 3 due to receivables equal to or exceeding 90 days, they shall be upgraded to Stage 2 if the receivables are less than 180 days, with the continued retention of expected credit losses calculated for these customers.

3. Customers shall be upgraded from Stage 3 to Stage 2 in case of meeting all quantitative and qualitative elements of Stage 2 and settling the accrued/deferred returns (as applicable) and maintaining regular payments for a period of 90 days.

Second: Regarding Small and Medium-Sized Companies - Regular in Payments as of December 31, 2019 - and whose default resulted from the repercussions of the current crisis:

These customers must be upgraded from Stage 3 to Stage 2, with emphasis on continuing to calculate expected credit losses for adjustments mentioned in the First Section based on Stage 3, until the customers meet all upgrade conditions as mentioned above, to allow for the calculation of expected credit losses based on Stage 2.

Third:
All of the above shall apply for a period of 18 months from the date thereof.

Fourth:
The necessity to act in accordance with the Circular issued on September 14, 2020, requiring banks to restructure credit facilities for customers after studying their financial situation and cash flows, with the aim of reaching a suitable facility structure among alternatives to support customers according to their current repayment capacity, with emphasis on the possibility for banks to use, when studying the bank's and the customer's situation, alternatives including: (i) increasing the facility term, (ii) restructuring the due installments, (iii) granting a grace period, and other alternatives available to banks.

Please accept our highest regards,

Tarek Amer