Chapter Six: Reserve Percentage

Banks are required to maintain with the Central Bank of Egypt, without interest, current account balances amounting to no less than 18% of their Egyptian Pound deposit balances. This decision shall apply starting from the reserve period beginning on October 4 to 17, 2022, regarding the average balances constituting the denominator from September 6 to 19, 2022. It is calculated according to the following rules:

First: The Numerator of the Ratio

The numerator of the ratio consists of the balances kept with the Central Bank in Egyptian Pounds, according to the records of the Central Bank of Egypt, excluding the account balance of the Central Bank designated for non-cash financing facilities in the bank.

Second: The Denominator of the Ratio

The denominator consists of:

1. Total customer deposits in Egyptian Pounds.
2. Deposits with foreign banks and financial institutions in Egyptian Pounds.
3. Balances of sales and repurchase operations of government financial securities (bonds and treasury bills) with customers through banks registered with the Central Bank of Egypt.

As for the Industrial Development Bank, the Egyptian Bank for Commerce and Development, and the Arab Bank for Housing and Development, the denominator is calculated based on the excess of the daily average total Egyptian Pound deposit balances over the actual daily customer balances of each week, over the total paid-up capital and its registered reserves.

The following are excluded from the reserve ratio denominator:

1. Savings systems with a term of five years or more, on the basis of contractual terms, issued with the approval of the Central Bank of Egypt, subject to the following controls:
   1.1 The minimum period during which withdrawal from the system is allowed upon acceptance of withdrawal dates must not be less than six months.
   1.2 The return rate on the certificate must be either:
   a. Fixed for the entire duration of the certificate, with the possibility of defining periodic intervals to adjust the rate, which shall apply to new issuances and not existing ones. b. Variable, provided that the method of calculating the variable rate is clarified based on margins linked to the Central Bank of Egypt's lending and borrowing rates, or any of the return rates on issued treasury bills, at the beginning of each periodic return period (quarterly, semi-annually, or annually). With regard to savings systems with increasing value and cumulative returns, where their returns exceed the nominal value of the certificate and are paid entirely at the end of the certificate's term, the basis for calculating this return must be determined, whether the return is simple or compound.
   1.3 The return calculation for certificates accepted for withdrawal dates must be based on the return rate applied to the certificate minus margins, with the Central Bank's lending rates for new issuances inversely proportional to the elapsed period of the certificate's term.
   1.4 The return rate on the loan secured by the certificate must be determined at no less than the return rate granted to it on the date of the loan, plus 2%.
   1.5 The necessity of full disclosure when announcing new issuances, according to the instructions regarding all its main features and attributes, so that the public of customers can identify them before subscribing to them.

2. Loans and credit facilities granted to small and medium-sized enterprises and startups, within the limit granted as of January 1, 2009, to direct banks towards granting credit to startups and small and medium-sized enterprises, subject to the following detailed rules and procedures:
   1.1 Compliance with the instructions issued by the Central Bank of Egypt regarding the controls of granting banking credit.
   1.2 The exemption applies to the outstanding balances in Egyptian Pounds of direct loans and facilities (outstanding balances) without contingent liabilities, for:
   a. Loans and facilities granted to new customers from small and medium-sized enterprises and startups as of January 1, 2009. b. The increase in existing loans and facilities for small and medium-sized enterprises and startups, provided that the balances of December 31, 2008, for existing loans and facilities for enterprises and startups are considered the basis for calculating the value of the increase subject to the aforementioned exemption. The total balances subject to exemption are excluded from the reserve ratio denominator on the last day of the period.
   1.3 This exemption does not apply to credit facilities granted to small and medium-sized enterprises owned and/or guaranteed by local entities, including loans and facilities granted in cooperation with the Social Fund for Development, or foreign entities, whether in the form of loans or deposits provided by those entities.
   1.4 Enterprises and startups are considered small or medium-sized, and its provisions apply to the financing granted to it, provided the following conditions are met:
   a. Its annual business volume or sales are not less than one million Egyptian Pounds and do not exceed twenty million Egyptian Pounds. b. Its paid-up capital is not less than two hundred and fifty thousand Egyptian Pounds and does not exceed six million Egyptian Pounds.

Provided that this is verified through obtaining each of the following:

• A recent extract from the commercial register, not exceeding one year from the date of submission.
• An approved balance sheet for the last financial year.
• A certificate issued by the auditor confirming the business volume or sales of the enterprise or startup for the last quarter of the financial year.

Banks must observe compliance with what was stated in the Supervision and Notification Sector letter dated March 7, 2005, regarding "Strategic Controls for Auditors Reviewing Financial Statements of Customers Applying to Banks for Credit Facilities," specifically what is stated in item number 3 of these controls.

Third: Period for Calculating the Ratio

The ratio is calculated based on the daily average for two weeks starting from the announcement day and ending on the announcement day, including weekends and official holidays, provided that the timing of the balances included in the numerator matches the timing of the balances in the denominator with a two-week lag.

Banks must submit the "Reserve Percentage - Form No. 450" statement to the Supervision and Notification Sector every two weeks, no later than Wednesday of each two-week period.