Chapter Nine Concentration of Banks' Credit Portfolios

In line with the Central Bank of Egypt's policy of encouraging banks to expand and diversify their customer base, and noting the concentration of banks' credit portfolios in a limited number of large companies, which may expose the banking sector to concentration risks, the Central Bank has decided the following:

In the event that the total credit facilities granted to the top 50 clients and their related parties with the bank exceed 50% of its credit portfolio, the following applies:

1. The preferred risk weight is raised on the excess value when calculating the capital adequacy criterion as follows:
   a. 200% if the aforementioned ratio ranges from more than 50% up to 70% of the bank's total credit portfolio.

   b. 300% if the aforementioned ratio exceeds 70% of the bank's total credit portfolio.

2. Regarding branches of foreign banks, the excess value must not exceed half of the capital base.

Banks are granted a period of one year to regularize their status from the date of these instructions.

In this regard, some clarifications were issued regarding these instructions on the concentration of banks' credit portfolios, where the following must be observed:

1. The total credit facilities granted to the top 50 clients are calculated based on the utilized amount by the client, not the authorized amount; however, in the case of credit facilities in the form of an "irrevocable commitment" that has not yet been utilized, reliance is placed on the authorized limit.

2. When calculating the total credit facilities for the top 50 clients, credit facilities granted to both regular and irregular customers are included.

3. The net credit facilities granted to the top 50 clients and the bank's credit portfolio are calculated in accordance with the regulatory instructions regarding the minimum capital adequacy criterion within the framework of the Basel implementation issued on December 24, 2012, with respect to the treatment of guarantees and provisions.

4. Cash guarantees provided by the client in a currency different from the currency of the credit facility are considered for the purposes allowed by the regulatory instructions issued on December 21, 2015, and its subsequent circular letters, regarding the refinancing of import operations.

5. In the event that the total credit facilities granted to the top 50 clients and their related parties with the bank exceed 50% of its credit portfolio, it is emphasized that an additional preferred risk weight is applied to the currently applied preferred risk weight in accordance with the regulatory instructions regarding the minimum capital adequacy criterion mentioned above, on the excess value when calculating the capital adequacy criterion, as follows:
   a. 200% if the aforementioned ratio ranges from more than 50% up to 70% of the bank's total credit portfolio.

   b. 300% if the aforementioned ratio exceeds 70% of the bank's total credit portfolio, This applies to the excess value exceeding 50%. And in an effort by the Central Bank of Egypt to support banks in performing their role in supporting various economic sectors, especially with the continued impact of the coronavirus pandemic, it has been decided to exempt banks from applying concentration limits 3 Banks' credit portfolios among the top 50 clients and their related parties until the end of December 2022.

1 Letter from the Deputy Governor of the Central Bank dated January 11, 2016 2 Letter from the Deputy Governor of the Central Bank of Egypt dated March 22, 2016 3 Letters issued by the Central Bank of Egypt dated March 31, 2021, April 16, 2020, and December 9, 2021