Regulatory Alerts2021-02-22
Added · Updated
Circular dated February 22, 2021 regarding stimulating banks to contribute to the capital of targeted investment funds to invest in small and medium-sized companies
The Central Bank of Egypt increases the regulatory threshold for bank contributions to venture capital funds targeting small and medium-sized enterprises (SMEs) from 20% to 25% of the total credit portfolio allocated to micro, small, and medium enterprises. It establishes a risk weight of 20% for these investments, subject to caps limiting exposure to 10% of the bank's core capital and 50% of the fund's equity, while requiring compliance with leverage ratios and internal capital adequacy assessment processes. The circular mandates quarterly reporting on investment shares and requires fund constitutions to allow for bank exit starting from the fourth year, particularly if no profits are achieved for three consecutive years.