Circular dated June 25, 2020 regarding the initiative to guarantee facilities for major companies operating in the industrial, agricultural and contracting sectors through the Credit Risk Guarantee Company

Cairo: June 25, 2020

Dear Chairman of the Board,

Greetings,

With reference to the Board of Directors of the Central Bank of Egypt's decision at its meeting held on December 13, 2017, to issue a commitment worth 2 billion Egyptian pounds in favor of the Credit Risk Guarantee Company, in exchange for the Company issuing its guarantees to banks to cover part of the risks associated with financing micro, small, and medium enterprises, and with reference to the Central Bank of Egypt's initiative issued on December 12, 2019, regarding making available an amount of 100 billion Egyptian pounds through banks at an annual interest rate of 8% (declining) to finance regular companies operating in the private industrial, agricultural, and contracting sectors with an annual turnover or revenues of 50 million Egyptian pounds or more, and its subsequent circulars.

In light of the repercussions of the novel coronavirus and its impact on the continuity of activity for many companies, and in light of the Central Bank's efforts to explore all means of support necessary to contain the repercussions in various fields, and to continue addressing the economic impacts of the current crisis and how to mitigate its effects, the Credit Risk Guarantee Company has expanded the scope of its work to include guarantees for major companies in addition to micro, small, and medium enterprises. The Board of Directors of the Central Bank of Egypt also decided at its meeting held on May 19, 2020, the following:

Launching an initiative under which the Central Bank will issue a commitment worth 7 billion Egyptian pounds -in tranches- in favor of the Credit Risk Guarantee Company as a umbrella for guaranteeing the balances of guarantees issued by the Company in favor of banks to cover a portion of the risks associated with financing major companies, according to the following: -

(1) Main Determinants of the Initiative:
A- Purpose of the Commitment: The Credit Risk Guarantee Company shall guarantee the credit facilities granted under the Private Industrial, Agricultural, and Contracting Sector initiative.

B- Targeted Categories: Beneficiary customers of the Private Industrial, Agricultural, and Contracting Sector initiative with an annual turnover/revenues of 200 million Egyptian pounds or more, and any amendments that may occur to them.

C- Duration of the Initiative: For a period of ten years or upon the full exhaustion of the commitment value, whichever comes first, provided that the commitment remains valid to cover the Company's guarantees issued to banks until these guarantees expire, even in the event of the end of the Initiative's period.

(2) When calculating the capital adequacy ratio criterion, a 0% risk weight is applied to the portfolio covered by the commitment issued by the Central Bank of Egypt to the Company.

(3) Regarding Item Five of the Circular regarding the bases for evaluating customers' creditworthiness and forming provisions, issued with the approval of the Board of Directors of the Central Bank of Egypt at its meeting held on May 24, 2005, the guarantee issued by the Credit Risk Guarantee Company against the Central Bank's commitment is considered when forming provisions, by excluding the portion covered by that guarantee from the balances of facilities granted to customers.

Banks are required to comply with the following: -

• Not to use the facilities granted under the aforementioned guarantee commitment for repaying existing facilities, and to ensure that the facility is used for the purpose for which it was granted.

• To use the aforementioned commitment to guarantee facilities for new customers or to increase existing facilities.

• Periodic declaration of the data of major companies' portfolios guaranteed by the Credit Risk Guarantee Company to the supervision and oversight department, through forms that will be provided to banks later.

• Providing the Credit Risk Guarantee Company with data on companies subject to the initiative on a monthly basis according to
  its requirements.

Please be kind enough to alert regarding taking the necessary action in this regard as of its date.

Accept our highest regards,

Tarek Amer