Chapter Seven: Maximum Limits for the Bank's Investments with a Single Customer, the Customer, and the Parties Associated with It, and the Parties Related to the Bank and the Parties Associated with Them

Article (56) of the Central Bank, Monetary and Financial System Law issued by Law No. 88 of 2003 authorizes the Board of Directors of the Central Bank to issue rules, ratios, and controls related to them, in accordance with the provisions of this law and the International Monetary Standards, regarding the maximum limits for investments with a single customer, the parties associated with him, and the parties associated with the bank.

In the field of applying what is mentioned above, the Board of Directors of the Central Bank of Egypt, in its meeting held on 7 Rabie' Al-Awwal 1427 AH (corresponding to March 14, 2006), issued the following decision:

First: Maximum Limits for the Bank's Investments with a Single Customer and the Parties Associated with Him

In the field of applying the provisions of Articles (51), (56), and (71) of the Central Bank, Monetary and Financial System Law issued by Law No. 88 of 2003, every bank shall comply with the following:

1. The maximum limit for the bank's investments with a single customer (for individuals not associated with each other) shall be 20% of the bank's capital (the First Limit).

2. The maximum limit for the bank's investments with a single customer and the parties associated with him shall be 25% of the bank's capital, excluding the parties associated with the customer from the definition of the customer as stated in Article (51) of Law No. 88 of 2003 (the Second Limit).

3. The maximum limit for the total investments of the bank with associated customers and customers and parties associated with them shall not exceed 10 times the bank's capital (the Third Limit).

4. The First and Second Limits shall apply to new cases of bank investments from the date of this decision. For existing cases, banks have three years from the date of issuing the decision to adjust their positions so that the limits during this period are as follows:

Year	First Limit	Second Limit	Third Limit
End of First Year (2006)	20%	25%	10 times Capital
End of Second Year (2007)	25%	27%	10 times Capital
End of Third Year (2008)	30%	30%	10 times Capital

5. The Board of Directors of the bank may increase the First Limit for new cases and existing ones to 25% instead of 20% for a single customer, and increase the Second Limit for new cases and existing ones to 25% instead of 27% for the end of the second and third years, and to 30% instead of 30% for a customer and the parties associated with him, provided that the following conditions are met: (a) The bank has credit limits approved by its Board of Directors for customers based on the criteria set by the Central Bank of Egypt dated 24 Shawwal 1426 AH (corresponding to December 24, 2005). (b) The Central Bank of Egypt accepts the credit limits of the bank. (c) The credit rating of the customer is at least Grade 2.

6. The Board of Directors of the Central Bank may grant banks an additional period of three years from the expiration of the prescribed period to adjust their positions for cases where the banks have undertaken to make investments for a specific purpose, for each case up to its limit.

7. The continuation of the rules regarding the definition of bank investments and the concept of a single customer and the parties associated with him, as issued by the Board of Directors of the Central Bank of Egypt on 22 Rajab 1417 AH (corresponding to October 10, 2002), and for capital, the rules for calculating it as stated in the decision of the Board of Directors of the Central Bank of Egypt in its meeting held on 18 Dhu al-Hijjah 1433 AH (corresponding to December 12, 2012) regarding the implementation of the minimum capital requirement for banks (First Chapter of this Part).

8. Every bank shall submit to the Central Bank of Egypt (Supervisory Sector) an annual report on the number of customers for whom the bank has exceeded the prescribed limits, along with a plan to adjust its positions in accordance with the provisions of this decision and the justifications for such increases.

9. Compliance with the rules and controls issued and the provisions of the Central Bank and Monetary and Financial System Law issued by Law No. 88 of 2003, and their amendments and additions, shall be monitored by the bank's management and the monitoring and follow-up of compliance with the criteria specified for it.

Second: Maximum Limits for the Bank's Investments with the Parties Related to the Bank and the Parties Associated with Them

Every bank shall comply with the following:

1. It is prohibited for the bank to grant loans or open accounts or provide loans and facilities representing credit or guarantees of any type to the board members of the bank and their associated parties, excluding the parties associated with the board members of the bank from natural persons, their spouses, children, or relatives up to the second degree, or for any of them, their spouses, children, or relatives up to the second degree, as shareholders or partners in their companies, or for persons working in its management with a special status.

2. The maximum limit for the bank's investments with a single customer and the parties associated with him from the board members of the bank from legal entities - represented in the Board of Directors - shall be as follows: (a) For companies in which the board member subscribes: 5%, provided that the total investments of the bank with these companies do not exceed 10% of the bank's capital. (b) For companies in which the board member subscribes and other persons: 2%, provided that the total investments of the bank with these companies do not exceed 5% of the bank's capital. And the credit facilities must be approved by the Board of Directors of the bank, and the Board must monitor them regularly.

3. The parties associated with a single customer from the board members of the bank from legal entities shall be as stated in Article (51) of Law No. 88 of 2003 (parties that the customer is considered associated with them as per Article 51 of the law). The term "associated" means that the natural or legal person is a owner of any percentage that enables him to influence the direction of the Board of Directors or control any of the decisions issued by its Board of Directors or control the decisions issued to its General Assembly.

And "board member" means any natural or legal person who owns alone or with his associated parties a percentage of 10% or more of the capital of the issuing bank.

3. For the management of the bank's business (including the CEO, heads of departments, and persons holding positions equivalent to or higher than the CEO) from the board members and persons working in management, it is sufficient to grant loans and facilities for their personal needs and in accordance with the rules and regulations of the bank for loans and facilities for employees and their associated parties, subject to the terms on which the bank deals with the public.

4. The bank shall deal with its subsidiary companies on the same terms on which it deals with the public.

5. In case the bank exceeds the limits prescribed for investments with a single customer and the parties associated with him from the board members of the bank (exceeding the prescribed limits), the bank shall be suspended from dealing with these shareholders for a period of one year from the date of the decision of the Board of Directors of the Central Bank, during which the positions shall be adjusted.

6. Every bank shall submit to the Central Bank of Egypt (Supervisory Sector) an annual report titled "Bank's Investments with a Single Customer and the Parties Associated with Him - Report No. 601" within eight months from the end of the fiscal year for which the report is prepared.

Third: Definition of Bank Investments with a Single Customer, and the Concept of a Single Customer

Bank investments with a single customer include the loans and credit facilities granted by the bank to a customer, as well as any assets held by the bank representing an obligation towards the customer, whether in the form of the customer's capital shares, bonds, sukuk, or other securities issued by the customer, as follows:

1. Investment: (a) Credit Facilities:

   • The utilized balances of loans and facilities in all their forms provided by the bank and its branches in the form of participations, profit-sharing, or murabaha, excluding from these balances the portion covered by cash deposits, guarantee letters, and guarantees issued by the Ministry of Finance or first-class banks and foreign banks with high credit ratings having a rating of A or higher.
   • Savings certificates and investment certificates issued by the Egyptian Monetary Authority and treasury bills and government securities issued by the Egyptian Monetary Authority are considered in this regard.
   • Cash deposits do not include advances from the parent bank or any of its group companies or the head office of a foreign branch.
   • Contingent liabilities represented by guarantees, sureties, commitments, or options, excluding from these commitments the portion covered by cash deposits, guarantee letters, and guarantees issued by the Ministry of Finance or banks with high credit ratings having a rating of A or higher.
   • Guarantee letters issued by the bank group to the foreign bank for its benefit or issued to it from outside the group (such as G/L, C/L, Standby L/C, etc.) are considered guarantees provided that these letters:
     • Are issued by a foreign bank with a high credit rating having a rating of A or higher (regardless of the rating direction, whether negative, positive, or stable).
     • Are irrevocable.
     • Are payable by the bank upon the first demand from the foreign bank.
     • Are not the specific guarantees provided by the customer to the bank to secure another customer's debt. (b) Assets held by the bank in the form of shares in the customer's capital, including the bank's shares in the capital of companies (with the necessity of complying with the provisions of Article 56 of the Central Bank of Egypt and Monetary and Financial System Law issued by Law No. 88 of 2003 and the decision of the Board of Directors of the Central Bank of Egypt issued on 27 Dhu al-Qi'dah 1425 AH (corresponding to January 6, 2005) regarding (Chapter Nine of this Part)). (c) The bank's holding of other securities such as bonds and sukuk issued by the customer to finance its needs.

2. Concept of a Single Customer (whether inside or outside Egypt):

In light of the results of practical experience showing the existence of companies having different legal forms but with the same capital or management in a group or association, and in light of the effective meaning of ownership or management, which does not limit the achievement of the purpose, and with the focus on credit risks whether in the form of loans to the bank or those exposed to it as a result of lending to the customer and all associated parties in large amounts, the Board of Directors of the Central Bank of Egypt, in its meeting held on 10 Muharram 1424 AH (corresponding to November 10, 2002), decided to update the concept of a single customer and its application as follows:

Every person or more (natural or legal) whom the bank considers investments with them under the aforementioned concept shall be considered a single customer, and the existence of a link between them shall be determined whether from the aspect of ownership or management, and whether this link is direct or indirect.

The concept of a single customer also includes any guarantee or surety for another, where one of them faces a financial crisis that affects the ability of any of the others to meet their obligations.

In this framework, the definition of a single customer is applied to dealings by the bank with any of the following characteristics:

1. A natural person: whether the bank deals with him in his name or in his capacity as a natural person.
2. An individual enterprise: operated by a natural person in his name or in his capacity as a natural person.
3. A company of persons: including partnerships or joint liability companies in which he is a partner in his personal capacity or in his capacity as a natural person.
4. A company belonging to the public sector or the private sector.
5. A company belonging to the private sector as follows: (a) A company established for public subscription in which the customer and the parties associated with him have ownership rights exceeding 50% of the invested capital, or have a controlling interest in the company even if their ownership percentage does not reach the specified limit. (b) A company established for public subscription in which the customer and the parties associated with him have ownership or management control.
6. The general economic group.

In this framework, the following is considered:

• The holding company of the public sector and its subsidiary companies are considered a single customer, where each of these companies is considered a single customer.
• For general economic groups and the companies following them and the companies in which they hold shares: (a) The general economic group is considered a single customer by itself. (b) Each of the companies of the public sector belonging to a general economic group is considered a single customer by itself. (c) Companies in which the general economic group holds shares, excluding the companies in item (b), are not considered companies and the parties associated with them having ownership rights exceeding 50% of the invested capital or having a controlling interest in the company even if their ownership percentage does not reach the specified limit, in accordance with the decision of the Board of Directors of the Central Bank of Egypt dated 10 Muharram 1424 AH (corresponding to November 10, 2002).

7. The unit of management.
8. The cooperative association, club, syndicate, or any other private entity.
9. The foreign or state entity.
10. The customer's guarantee for another or his surety.

The following considerations are taken into account:

• The prescribed maximum limits exclude loans, credit facilities, and any form of investment granted to government entities, general economic groups, public sector companies, and public asset sector companies.
• Service entities of government entities are considered.
• Loans and facilities granted to government entities and companies are within the framework of the economic and social development plan and the general budget of the state, which includes special loans for these entities, along with credit facilities granted to government entities.
• The provisions of Articles (56) and (71) of the Central Bank and Monetary and Financial System Law do not apply to transactions between banks.

In light of the steps taken to apply this concept, the following is issued:

1. The bank shall require each customer to obtain or renew or increase the limits granted to him under the concept of the borrower to obtain a declaration from him regarding the parties associated with him as previously mentioned.
2. The Board of Directors of each bank shall issue fixed rules for the review and annual assessment of the Egyptian credit estimates, and also by issuing a unified form to be filled by all the parties involved in the credit application and the parties associated with him, so that the responsible person in the credit department at the bank fills it, and the form of the credit estimate is presented to the competent authority to obtain, renew, or increase the limits granted to the customer upon approval of the aforementioned declaration.
3. For the bank concerned with what the Board of Directors of the Egyptian Monetary System Credit Monitoring Committee determines regarding the customer and the parties associated with him from the minimum declaration of the customer and the minimum Egyptian credit estimate.
4. The competent authority shall be informed of the obtaining, renewal, or increase of the limits granted to the customer in the bank's reports of the Egyptian Monetary System Credit Monitoring Committee as stated in the Central Bank of Egypt decision, and also for the customer and the parties associated with him.