Regulatory Alerts2024-07-01
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Circular dated July 1, 2024 regarding the gradual phase-out of temporary SME loan exemptions under IFRS 9
The Central Bank of Egypt has approved a gradual 18-month phase-out, concluding in December 2025, of the temporary exemption allowing small and medium-sized enterprises (SMEs) to remain out of Stage 3 classification under IFRS 9. The new framework mandates that SMEs be reclassified into Stage 3 based on escalating consecutive overdue receivables thresholds of 180, 150, and 120 days through December 2024 to December 2025, ultimately standardizing the 90-day threshold from January 2026. Additionally, the Central Bank extends until December 2025 the provision allowing SMEs to upgrade from Stage 3 to Stage 2 upon meeting quantitative and qualitative criteria, settling impaired returns, and maintaining consistent payments for 90 days.
Mr. / Chairman of the Board July 1, 2024 Bank
Greetings and regards,
With reference to the Circular dated December 14, 2021 regarding the temporary exemption for the treatment of non-performing loans to small and medium-sized enterprises (SMEs) under the instructions for implementing International Financial Reporting Standard No. 9, and also the Circular dated June 14, 2023 regarding extending the application of this exemption until the end of June 2024, and in light of the continued repercussions of various crises and their impact on sectors, and with a view to supporting economic commitments, particularly the SME sector, in assisting this vital sector vis-à-vis the banking sector and continuing work, production, and preserving employment, the Board of Directors of the Central Bank of Egypt approved at its meeting held on June 25, 2024 the following:
-1 The gradual phase-out of the exemption regarding the classification of SME customers into Stage 3 within an 18-month period until the end of December 2025, whereby that category of customers will be classified into Stage 3 in case of non-compliance with the contractual terms of credit facilities granted to customers as follows:
- Existence of receivables equal to or exceeding 180 consecutive days until the end of December 2024.
- Existence of receivables equal to or exceeding 150 consecutive days until the end of June 2025.
- Existence of receivables equal to or exceeding 120 consecutive days until the end of December 2025. This will result in classifying customers into Stage 3 when receivables equal or exceed 90 consecutive days as of January 2026.
-2 Extending the provision regarding upgrading customers from Stage 3 to Stage 2 in case of meeting all quantitative and qualitative elements of Stage 2, settling due impaired/provisioned returns (as applicable), and maintaining regular payments for 90 days, until the end of December 2025.
Please accept our highest regards,
Hassan Abdullah