Circular dated January 8, 2020 regarding the initiative for irregular legal persons (creditworthiness categories 9 and 10)

Cairo, January 8, 2020

Dear Mr. Chairman,

Greetings,

With reference to the initiative issued on December 12, 2019, concerning legal persons, whether legal proceedings have been taken against them or not, from customers with doubtful or bad debts (creditworthiness categories 9 and 10) and whose debt balance is less than 10 million EGP, the Board of Directors of the Central Bank of Egypt, in its session held on January 5, 2020, decided to amend some provisions of the aforementioned initiative as follows:

1. The initiative applies to legal persons, whether legal proceedings have been taken against them or not, from customers with doubtful or bad debts (creditworthiness categories 9 and 10), and whose debt balance is less than 10 million EGP.

2. The outstanding debt balance in the bank's books (without accrued interest) as of September 30, 2019.

3. The initiative takes effect from this date until December 31, 2020.

4. If the client, during the initiative period and until December 31, 2020, pays in cash or in-kind settlement (if the bank accepts in-kind settlement) 50% or more of the debt balance, the following will apply:

   a. Removal from the negative list at the Central Bank and the Egyptian Credit Information Company (Score - I).

   b. The trading ban regarding this debt will not apply.

   c. Withdrawal of all pending and exchanged cases at courts immediately upon agreement between the client and the operating banks on the settlement terms.

   d. Release of all guarantees related to this debt.

5. The aforementioned 50% percentage will be paid as follows:

   i. At least 20% by a deadline of June 30, 2020.

   ii. The remaining portion of the 50% by a deadline of the end of December 2020.

I also wish to emphasize the following:

1. Refraining from resorting to the courts by filing lawsuits against customers unless fraud by the customers is proven.

2. The necessity of conducting a credit study for customers, ensuring that lending is based on sound creditworthiness and relying on project revenues as a source for debt repayment, while avoiding excessive reliance on personal guarantees and collateral from customers.

3. Banks shall not obtain cheques as guarantees for facilities, but rather rely solely on obtaining promissory notes.

Please proceed with taking the necessary action to implement the aforementioned decision from its date.

Accept my highest regards,

Tarek Amer