Circular dated March 1, 2017 regarding temporary facilities granted in foreign currencies

Cairo: 1 March 2017

Dear Chairman of the Board,

Greetings,

In light of the meeting held on Monday, February 20, 2017, at the Central Bank of Egypt with the chairmen of the boards of directors of banks, attended by representatives of the Investors Union, to discuss the status of temporary facilities granted in foreign currencies to certain customers pursuant to the circular dated January 14, 2013, and subsequent circulars on the same subject, during which the impact of foreign exchange market developments on the liabilities of these companies was discussed.

In light of the above, a comprehensive inventory of the liabilities of these companies was conducted across the banking sector, revealing that the majority of companies receiving temporary facilities fall within the segment of companies with annual sales/operations of 500 million Egyptian pounds or less, and the temporary facilities due on them do not exceed 5 million US dollars. After studying available alternatives and mitigation measures, the Central Bank has decided to issue guiding specifications through which banks will study each case of the aforementioned companies individually and take the appropriate decision regarding them as follows:

First: Banks are permitted not to classify any company receiving temporary facilities in foreign currency as non-performing, granting them a grace period to rectify their situation, except in the event of the customer's non-cooperation regarding the seriousness of repayment.

Second: Regarding companies with annual sales/operations of 500 million Egyptian pounds or less and temporary facilities due on them not exceeding 5 million US dollars across the banking sector:

1. Companies are determined based on the latest statement provided to the Supervision and Inspection Sector of the Central Bank regarding customer balances at the end of February 22, 2017.

2. In case the company deals with more than one bank, the Central Bank will notify the dealing banks to coordinate among themselves for the same customer, under the supervision of the bank holding the largest temporary loan debt.

3. Each bank will prepare a credit study for the activity of each customer individually to restructure the debt.

4. The gap in the cash collateral coverage will be covered for customers wishing to cover their temporary liabilities through the aforementioned guiding specifications, so that the coverage ratio against temporary facilities becomes 100%, by granting banks loans to their customers in Egyptian pounds based on the prevailing exchange rate on the execution date, to cover the gap in cash collateral, based on the study prepared for each customer regarding cash flows.

5. A debtor interest rate on the facilities granted in local currency will be applied within the first two years from the date of granting the loan, with a maximum of 12% (declining) without any commission on the highest debtor balance.

Third: Regarding companies that fall outside the scope of the second item and those that have not expressed willingness to benefit from the guiding specifications above:

1. These companies will be granted a creditor interest rate on local currency cash collateral (at the overnight deposit rate - 1%).

2. An interest rate on foreign currency debtor balances parallel to the rate of Treasury bills issued will be applied at 3.62% annually, according to the last issuance price in US dollars.

On another level, banks must review the credit limits granted to companies to finance import operations and working capital to align with the changes that occurred in exchange rates since November 3, 2016.

Please be kind enough to emphasize strict compliance with the above and take what is necessary in this regard.

Yours faithfully, Gamal Naguib