Regulatory Alerts2016-04-20
Added · Updated
Circular dated March 7, 2016 amending the rules and regulations of bank financing for the acquisition of companies
The Central Bank of Egypt amends the regulations governing bank financing for the acquisition of companies by establishing specific prudential requirements for banks, including mandatory board-approved acquisition financing policies, comprehensive financial and legal due diligence, and cash flow sufficiency assessments. The amendment introduces risk-weighted capital charges of 200% for strategic investors and 400% for private equity or venture capital entities, while capping total acquisition financing at 2.5% of a bank's loan portfolio and limiting single-borrower exposure to 0.5%. Furthermore, the aggregate financing for any single acquisition across all banks in Egypt is capped at 50% of the transaction value, with a provision for banks to seek Central Bank approval for exceptions, and existing financing arrangements must be brought into compliance within six months.