Cairo: 24 December 2012

Greetings and,

Following,

In light of the directive addressed to the Central Bank of Egypt to apply international best practices in line with developments in the banking market and in the context of the strategy announced by Governor Dr. [Name] during the meeting held in October 2009 regarding the implementation of Basel decisions in the presence of the heads of Egyptian banks, and referring to the discussion papers and quantitative impact study models issued in this regard.

We kindly request your attention to the fact that the Board of Directors of the Central Bank of Egypt, in its meeting held on 18 December 2012, corresponding to the instructions regarding the Minimum Capital Adequacy Ratio (attached), within the framework of implementing the aforementioned decisions, with the necessity of observing the following:

First: Banks operating in Egypt - with the exception of foreign bank branches - are committed to maintaining a minimum ratio of 10% between the core capital elements (numerator of the standard) and risk-weighted assets (denominator of the standard), in order to cover credit, market, and operational risks.

Second: Regarding foreign bank branches, the controls contained in the attached instructions apply to them, with the exception of maintaining the ratio mentioned in the first item.

Third: Banks operating in Egypt are required to comply with the controls contained in these instructions starting from December 2012, and this applies to banks that prepare their annual financial statements at the end of December of each year, and starting from June 2013 for banks that prepare their annual financial statements at the end of June of each year. A transition period of a maximum of six months is to be determined during which banks submit their data according to the previously issued controls regarding the capital adequacy standard alongside the new controls in parallel, to ensure the integrity of systems and guarantee data validity.

Fourth: In case of non-compliance with the minimum capital adequacy ratio (10%) according to the new controls, the Central Bank of Egypt (Supervision and Control Sector) is to be notified with a specific timeline for compliance with the minimum capital adequacy standard during the transition period specified in item third.

Fifth: The Supervision and Control Sector is delegated to issue any interpretative memoranda for these instructions and to consider approval of requests submitted by banks within their framework.

Sixth: The operation of previous resolutions of the Board of Directors of the Central Bank of Egypt issued regarding the capital adequacy standard and related instructions is repealed after the expiration of the transition period.

Please be notified to comply with what is presented. You will be subsequently provided with the forms prepared for this purpose.

Accept our highest respect,

Gamal Naguib

Regarding the Minimum Capital Adequacy Standard In the framework of implementing Basel decisions

Part One	Application Rules	1
1/1	Scope of Application
	Banks are reported on a consolidated basis as a banking group, which is an economic entity dominated by banking activity, without regard to legal boundaries between the bank and its subsidiaries. The banking group includes the bank, its branches inside and outside, and other financial companies (excluding insurance companies) in which the bank (or the bank and its related parties) owns more than 50% of shareholders' rights or any percentage enabling it to control that entity according to the concept previously mentioned. As for banks that do not have subsidiaries (all their branches inside and outside) and banks that are subsidiaries of foreign banks, reporting is on an individual basis.
2/1	Capital Adequacy Ratio
	Banks operating in Egypt - with the exception of foreign bank branches - are committed to maintaining a minimum ratio of 10% between core capital elements (numerator of the standard) and risk-weighted assets (denominator of the standard) to cover credit, market, and operational risks. As for foreign bank branches, the controls contained in the instructions apply to them, with the exception of maintaining the ratio mentioned.
3/1	Implementation Timeline
	Banks operating in Egypt must comply with the controls contained in these instructions starting from December 2012 for banks preparing annual financial statements at the end of December, and starting from June 2013 for banks preparing annual financial statements at the end of June. A transition period of a maximum of six months is determined during which banks submit data according to previous capital adequacy controls alongside new controls in parallel to ensure system integrity and data validity.
4/1	Non-Compliance
	In case of non-compliance with the minimum capital adequacy ratio (10%) according to new controls, the Central Bank of Egypt (Supervision and Control Sector) must be notified with a specific timeline for compliance during the transition period specified in item 3/1.
5/1	Delegation
	The Supervision and Control Sector is delegated to issue interpretative memoranda for these instructions and consider approval of bank requests.
6/1	Repeal
	Previous resolutions of the Board of Directors of the Central Bank of Egypt regarding the capital adequacy standard and related instructions are repealed after the transition period expires.
7/1	Reporting
	The capital adequacy standard statement is prepared quarterly on a consolidated basis according to audited financial statements by external auditors, along with periodic statements on bank contributions representing more than 50% of capital.
Part Two	Capital Base	2
1/2	General Definitions
	Banking Group: An entity that possesses effective influence over it but does not reach the level of control. Usually, the group owns a share of 20% to 50% of voting rights.
2/2	Sister Companies
	An entity in which the group has the ability to control its financial and operational policies. Usually, the group owns a share exceeding half, ensuring a majority of voting rights.
3/2	Financial Companies
	In the context of applying these instructions, financial companies are "Banks, exchange companies, companies engaged in real estate financing and factoring companies, companies engaged in financial leasing, and companies operating in the field of securities according to the list contained in Article 27 of Capital Market Law No. 95 of 1992."
4/2	Bank's Capital Base
	Consists of two tiers: a set of positive and negative elements (deducted elements and elements not considered). Their sum aims to reach the capital value used in calculating the capital adequacy standard, serving as funding for bank activity and as a guarantee to cover unexpected losses not covered by provisions, ensuring protection of depositors' funds and other creditors in case of bank asset liquidation. This base is the foundation of all controls issued by the Central Bank of Egypt.
5/2	Elements Not Considered
	Elements identified in calculating the minimum regulatory capital adequacy ratio to avoid any unreal fluctuations in the bank's equity.
6/2	Credit Risk
	Potential losses resulting from the probability of borrower clients or counterparties failing to meet their obligations according to contract terms.
7/2	Counterparty Risk
	Losses resulting from the failure of one party to a financial transaction to meet its obligations to the other party before the agreed settlement date, if the net market value of the transaction involving the bank with the counterparty is positive on the date of the other party's failure. Counterparty risk differs from credit risk for loans in that the probability of loss from credit risk is one-sided (the bank faces the loss alone), whereas counterparty risk is two-sided, as the market value of the contracted transaction can be positive or negative for either party.
8/2	Operational Risk
	Potential losses resulting from the failure or inadequacy of internal procedures, human elements, and systems at banks or due to external events. This definition includes legal risks, but excludes the bank's strategic risk and reputation risk.
9/2	Legal Risk
	Potential losses resulting from fines, penalties, and sanctions applied to banks in case of failure to meet contractual and legal obligations, or due to their application in a manner contrary to contract provisions, or because those provisions do not clearly and correctly reflect the contractual rights and obligations of the bank and/or the counterparty.
10/2	Market Risk
	Potential losses resulting from unfavorable movements in market prices that may negatively affect the value of the bank's investment portfolios for trading purposes, in addition to foreign exchange rate risks associated with the bank's balance sheet as a whole, which in turn affects the bank's profitability and capital base. Market risk includes all investments held for trading purposes, whether in debt instruments, shares, or investment funds.
11/2	General Risk
	Potential losses resulting from negative changes in the value of financial instruments arising from unfavorable movements affecting the market in general, such as negative changes in the value of debt instruments arising from unfavorable movements in interest rates, or negative changes in the value of shares arising from unfavorable movements in the securities market in general.
12/2	Specific Risk
	Potential losses resulting from unfavorable changes in the value of specific financial instruments attributed to factors related to the issuer of the financial instrument.
13/2	Settlement Risk
	Potential losses resulting from the failure to settle transactions related to financial instruments in the trading portfolio (debt instruments, shares, and derivatives, including currency derivatives) on the maturity date.
14/2	Foreign Exchange Rate Risk
	Potential losses resulting from unfavorable changes in exchange rates that may negatively affect all existing foreign currency positions at the bank.

Part One Application Rules

1/1 Scope of Application

These instructions apply to all banks operating in the Arab Republic of Egypt and subject to the supervision of the Central Bank of Egypt as follows:

1/1/1 Reporting is on a consolidated basis for a banking group, which is an economic entity dominated by banking activity, without regard to legal boundaries between the bank and its subsidiaries. The banking group includes the bank, its branches inside and outside, and other financial companies (excluding insurance companies) in which the bank (or the bank and its related parties) owns more than 50% of shareholders' rights or any percentage enabling it to control that entity according to the concept previously mentioned. As for banks that do not have subsidiaries (all their branches inside and outside) and banks that are subsidiaries of foreign banks, reporting is on an individual basis.

2/1/1 Banks operating in Egypt - with the exception of foreign bank branches - are committed to maintaining a minimum ratio of 10% between core capital elements (numerator of the standard) and risk-weighted assets (denominator of the standard) to cover credit, market, and operational risks. As for foreign bank branches, the controls contained in the instructions apply to them, with the exception of maintaining the ratio mentioned.

3/1/1 Banks operating in Egypt must comply with the controls contained in these instructions starting from December 2012, and this applies to banks that prepare their annual financial statements at the end of December of each year, and starting from June 2013 for banks that prepare their annual financial statements at the end of June of each year. A transition period of a maximum of six months is to be determined during which banks submit their data according to the previously issued controls regarding the capital adequacy standard alongside the new controls in parallel, to ensure the integrity of systems and guarantee data validity.

4/1/1 In case of non-compliance with the minimum capital adequacy ratio (10%) according to the new controls, the Central Bank of Egypt (Supervision and Control Sector) is to be notified with a specific timeline for compliance with the minimum capital adequacy standard during the transition period specified in item (3/1/1).

5/1/1 The Supervision and Control Sector is delegated to issue any interpretative memoranda for these instructions and to consider approval of requests submitted by banks within their framework.

6/1/1 The operation of previous resolutions of the Board of Directors of the Central Bank of Egypt issued regarding the capital adequacy standard and related instructions is repealed after the expiration of the transition period.

7/1/1 The capital adequacy standard statement is prepared quarterly on a consolidated basis according to audited financial statements by external auditors, in addition to attaching a statement on bank contributions that represent more than 50% of capital within the data on a periodic basis.

1 Source in financial companies which has actual control over it.

1 According to the concept of actual control contained in Article (51) of the Central Bank, Banking System and Currency Law issued by Law No. 88 of 2003.

2: The entity that the group possesses effective influence over it but does not reach the level of control.

1/2 Sister Companies

Usually, the group owns a share of 20% to 50% of voting rights.

2/2 Subsidiary Companies

The entity in which the group has the ability to control its financial and operational policies.

Usually, the group owns a share exceeding half, ensuring a majority of voting rights.

3/2 Financial Companies: In the context of applying these instructions, financial companies are "Banks, exchange companies, companies engaged in real estate financing and factoring companies, companies engaged in financial leasing, and companies operating in the field of securities according to the list contained in Article 27 of Capital Market Law No. 95 of 1992."

4/2 Bank's Capital Base: Consists of two tiers, which are a set of positive and negative elements (deducted elements and elements not considered). Their sum aims to reach the capital value used in calculating the capital adequacy standard, serving as funding for bank activity in addition to being a guarantee to cover banking risks, absorbing unexpected losses not covered by provisions, while ensuring protection of depositors' funds and other creditors in case of bank asset liquidation. This base is the foundation of all controls issued by the Central Bank of Egypt.

5/2 Elements Not Considered: These are elements identified in the framework of calculating the minimum regulatory capital adequacy ratio to avoid any unreal fluctuations in the bank's equity.

6/2 Credit Risk: Potential losses resulting from the probability of borrower clients or counterparties failing to meet their obligations according to contract terms.

7/2 Counterparty Risk (Risk Counterparty): Losses resulting from the failure of one party to a financial transaction to meet its obligations to the other party before the agreed settlement date for that transaction, in case if the net market value of the transaction involving the bank with the counterparty is positive on the date of the other party's failure to meet its obligations. Counterparty risk differs from credit risk for loans in that the probability of loss resulting from credit risk is one-sided, where the bank faces the loss alone, whereas counterparty risk is two-sided, as the market value of the contracted transaction can be positive or negative for either party to the transaction.

2 According to the definition contained in the rules for preparing and presenting financial statements and the basis for recognition and measurement.

8/2 Operational Risk: Potential losses resulting from the failure or inadequacy of internal procedures, human elements, and systems at banks or due to external events. This definition includes legal risks, but excludes both the bank's strategic risk and reputation risk.

9/2 Legal Risk: Potential losses resulting from fines, penalties, and sanctions applied to banks in case of failure to meet their contractual and legal obligations, or due to their application in a manner contrary to contract provisions, or because those provisions do not clearly and correctly reflect the contractual rights and obligations of the bank and/or the counterparty.

10/2 Market Risk: Potential losses resulting from unfavorable movements in market prices that may negatively affect the value of the bank's investment portfolios for trading purposes, in addition to foreign exchange rate risks associated with the bank's balance sheet as a whole, which in turn affects the bank's profitability and capital base. Market risk includes all investments held for trading purposes, whether those investments are in debt instruments or shares or investment funds.

11/2 General Risk: Potential losses resulting from negative changes in the value of financial instruments and arising from unfavorable movements that occur in the market in general, such as negative changes in the value of debt instruments arising from unfavorable movements in interest rates, or negative changes in the value of shares arising from unfavorable movements in the securities market in general.

12/2 Specific Risk: Potential losses resulting from unfavorable changes in the value of specific financial instruments attributed to factors related to the issuer of the financial instrument.

13/2 Settlement Risk: Potential losses resulting from the failure to settle transactions related to financial instruments in the trading portfolio (debt instruments, shares, and derivatives, including currency derivatives) on the maturity date.

14/2 Foreign Exchange Rate Risk: Potential losses resulting from unfavorable changes in exchange rates that may negatively affect all existing foreign currency positions at the bank.

Part Two Capital Base

1/2 General Conditions for Application

1/1/2 Credit positions exclude non-considered assets and those deducted from the capital base, and assets included in the

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