Regulatory Alerts2022-08-08
Fundamentals of creditworthiness assessment and provisioning
The Central Bank of Egypt approved the attached rules regarding the assessment of creditworthiness of clients and the formation of provisions, which replace the rules for the classification of assets and the formation of provisions issued by the Central Bank of Egypt in 1991. The Board of Directors of the Central Bank of Egypt directed banks to review their internal policies for assessing the creditworthiness of clients when granting, increasing or renewing credit, as well as when forming provisions in accordance with these rules, which cover credit risk management and creditworthiness assessment and the formation of provisions for each of the following: commercial, industrial, real estate and personal housing loans, in addition to small loans for economic activities. The rules for the formation of provisions will be applied to the banks' financial statements for the quarter ending December 2005 or the year ending December 2005, with each bank required to amend its internal policies to comply with the requirements of these rules and to submit a copy of the amended policies to the Central Bank of Egypt within three months of the date of this circular. The Board of Directors also directed the following: 1. The importance of training bank employees on the application of these rules through the Banking Institute. 2. The importance