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.

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Cairo on: 7 March 2016

Mr. Chairman of the Board of Directors
Bank of Tahya, greetings,

With reference to the circular letter dated January 25, 2009, attached with the decision of the Board of Directors of the Central Bank of Egypt in its session held on January 6, 2009, regarding the controls and rules of bank financing for the acquisition of companies, and in light of the supervisory role of the Central Bank of Egypt, which aims to limit any high-risk practices that may affect the efficiency and performance of banks,

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Lineage: In force

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Source: Central Bank of Egypt — original document · Summary generated with machine assistance and reviewed before publication; the authoritative text is the regulator's original document. How RegAlert works