Regulatory Alerts2014-03-05
Real estate financing initiative for the benefit of low- and middle-income people
The Governor of the Central Bank, Hisham Ramez, has issued a directive banning all banks and real estate financing companies from participating in any form of capital increase for entities operating under this law. According to the directive, the following points are highlighted: 1. Banks and real estate finance companies must not use their liquidity to invest in shares of institutions operating under this regulation. 2. The Central Bank shall have the right to inspect and monitor the compliance of banks and real estate finance companies with all procedures and rules of this law, and take the necessary measures to ensure the application of these rules. 3. No more than 20% of the capital of the participating institution can be financed through the Central Bank's mortgage-backed securities program. 4. An agreement must be concluded between the banking institution and real estate finance companies, and all procedures and policies related to this regulation for financing institutions and their compliance with mortgage and loan requirements for clients. 5. It is prohibited by any circumstance for any branch of a bank or newly established real estate finance company under this law to buy shares of said companies. 6. Within the framework of this regulation, the Central Bank shall have the right to audit (a) the capital adequacy of banks **their own** based on the prudential regulations and guidelines for setting the minimum capital adequacy ratios for banks and the required reserves based on the unified regulatory system for determining the appropriate market value of mortgage loans and commercial real estate, with a maximum period of five years instead of three. 7. It is mandatory for a competent entity supervising and monitoring banks to establish clear procedures and special rules for implementing these regulations. I kindly request you to pay attention to taking the necessary measures in this regard. And please accept my highest regards, Hisham Ramez, Governor of the Central Bank.