Regulatory Alerts2013-01-14
A circular dated December 29, 2012 regarding the rules regulating the balance limits in banks’ currency positions
I would like to draw attention to a resolution of the Board of Directors of the Central Bank of Egypt, dated September 9, 1993, concerning the Basel Committee's capital adequacy standards for banks, and the subsequent circulars issued in this regard. The Central Bank of Egypt is committed to upholding prudential measures and guidelines as per the Basel Committee's standards to ensure the soundness of the banking system and its performance. Consequently, for all banks operating in Egypt including foreign bank branches, the following rules apply: 1) The maximum amount of profit that can be earned from non-Egyptian currencies shall not exceed 1% of the paid-up capital. 2) The total profit generated from non-Egyptian currencies shall not exceed 2% of the paid-up capital. 3) The maximum amount of loss that can be incurred from any currency, foreign or domestic, shall not exceed 10% of the paid-up capital. 4) The total loss that can be incurred from non-Egyptian currencies or Egyptian currencies shall not exceed 20% of the paid-up capital. 5) The profit or loss generated from holding foreign exchange reserves in Egyptian pounds is subject to a limit of 10% of the paid-up capital. 6) The definition of the paid-up capital, as per Basel standards, shall be applied, considering what was stipulated earlier regarding the minimum Basel capital adequacy ratio under the application of Basel II guidelines from December 31, 2012 onwards. 7) Banks are required to adhere to all previous instructions not mentioned above. I kindly request that you pay close attention and take necessary action regarding what was previously stated. Thank you very much. Jamal Nageem.