Circular dated November 14, 2021 regarding updating the rules for licensing and registration of banks and representative offices of foreign banks

Cairo on: November 14, 2021

Dear Mr. Chairman of the Board of Directors of the Bank,

Reference is made to the Central Bank and Banking System Law issued by Law No. 194 of 2020. Please be informed that the Board of Directors of the Central Bank of Egypt approved, in its meeting held on October 12, 2021, the update of the rules for licensing and registration of banks and representative offices of foreign banks, as well as the partial and full suspension of operations, in accordance with the provisions of the aforementioned Law.

The aforementioned instructions have been published on the Central Bank's website (www.cbe.org.eg), and you may view them via the following link: Circular Letters (www.cbe.org.eg).

Please accept our highest regards,

Gamal Naguib

Rules for Licensing and Registration of Banks and Representative Offices of Foreign Banks

Table of Contents

• Introduction
• First: Rules for Licensing and Registration of Banks
  1. Licensing Conditions
  2. Procedures for Obtaining Preliminary Approval
  3. Documents Required to Obtain Preliminary Approval
  4. Procedures for Licensing the Bank and the Foreign Bank Branch
  5. Registration of the Bank or Foreign Bank Branch
  6. Modification of Registration Data
• Second: Licensing and Registration of a Representative Office of a Foreign Bank in the Arab Republic of Egypt
  1. Conditions for Licensing a Foreign Bank Representative Office
  2. Documents Required to Open a Representative Office
  3. Registration of the Representative Office
  4. Modification of Registration Data for the Representative Office
• Third: Cancellation of License, Partial or Full Suspension of Operations, and Deregistration

These instructions have been prepared in accordance with the provisions of the Central Bank and Banking System Law issued by Law No. 194 of 2020, which prohibits any unregistered entity from using the word "Bank" or any similar term in any language, whether in its specific name, its commercial address, or its slogan, if such use is likely to cause confusion among the public. It is also prohibited for any natural or legal person to conduct any banking business without obtaining a license, except for public legal entities conducting such business within the scope of their establishment mandate.

The instructions include rules for licensing and registration of banks (whether Egyptian joint-stock companies or branches of foreign banks or foreign financial institutions), and representative offices of foreign banks in the Arab Republic of Egypt, as well as rules for the cancellation of licenses and the partial and full suspension of operations, in accordance with the current rules.

First: Rules for Licensing and Registration of Banks

1. Licensing Conditions:

1-1. An Egyptian joint-stock company, all of whose shares are registered, with a paid-up issued capital of no less than five billion Egyptian pounds or its equivalent in free currencies.

2-1. A branch of a foreign bank whose headquarters has a specific nationality and is subject to the supervision of a supervisory authority in the country where its headquarters is located, with capital allocated for the bank's activity in the Arab Republic of Egypt of no less than fifty million US dollars or its equivalent in free currencies.

3-1. Clarity of the ownership structure - including related parties - to the extent that ensures identification of the Ultimate Beneficiary Owner and verification of the legitimacy of the source of funds.

4-1. The license must not conflict with the general economic interest of the State.

5-1. The license must not lead to a violation of competition rules and the prevention of monopolistic practices.

6-1. The commercial name adopted by the bank must not be misleading or similar in a way that causes confusion with the name of another bank or entity.

7-1. Competence in studying the financial and economic feasibility, including a statement of the objectives of its establishment, its work plan, the nature of the activities and services it will provide, and a market study demonstrating its ability to mobilize savings and invest them.

8-1. The key personnel (such as founders, ultimate beneficiaries, members of the Board of Directors, and senior officials) must possess integrity, good reputation, and financial soundness.

In the event that the foreign bank or foreign financial institution receives a rating of "A" or higher from one of the global independent rating agencies (Fitch Ratings, Moody's, S&P), the following must be provided in addition to the above:

a. The headquarters must have a specific nationality. b. The headquarters must have policies to combat corruption, bribery, money laundering, and terrorist financing. c. The headquarters must be subject to the supervision of the corresponding supervisory authority in the country where it is located, and must obtain the approval of that authority to operate in the Arab Republic of Egypt. d. The corresponding supervisory authority must apply the principle of consolidated supervision and must not object to the application of the joint supervision principle with the Central Bank.

2. Procedures for Obtaining Preliminary Approval:

2-1. Submit a request to the Central Bank to obtain preliminary approval to take steps to establish a bank or a foreign bank branch, accompanied by the documents referred to in Item (3) below, and proof of payment of the application examination fee of one million Egyptian pounds for a bank in the form of an Egyptian joint-stock company or fifty thousand US dollars for a foreign bank branch.

2-2. The request is submitted to the Board of Directors of the Central Bank for a decision thereon, and the decision on the request must be issued within ninety days from the date of its submission, accompanied by the required documents for a bank in the form of an Egyptian joint-stock company. The Board of Directors may extend this period for a similar period in the case of a bank in the form of a foreign bank branch. In that case, the degree of cooperation agreed upon between the Central Bank and the corresponding foreign authority in the country where the headquarters is located must be taken into account, for coordination between them in the field of supervision and oversight. In the event of rejection of the request, the key personnel are notified thereof within thirty days from the date of the rejection decision.

3. Documents Required to be Submitted to Obtain Preliminary Approval:

3-1. For a bank in the form of an Egyptian joint-stock company:

1-3-1. A copy of the draft Articles of Association containing data on the names, nationalities, and addresses of the founders, and their total share in the capital, and the Articles of Association of the founders who are legal persons.

2-3-1. A statement clarifying the ownership structure - including related parties - to the extent that ensures identification of the Ultimate Beneficiary Owner and verification of the legitimacy of the source of funds, and a statement of the percentage of shares to be offered in a public offering.

3-3-1. A statement of the participation percentage of each founder and the related parties in other financial institutions inside and outside the Arab Republic of Egypt, in accordance with the concept of related parties stipulated in the Central Bank and Banking System Law.

4-3-1. Proof that none of the founders, main shareholders, members of the Board of Directors, or ultimate beneficiaries are listed on the sanctions lists (local and international).

5-3-1. A certificate stating that no bankruptcy or insolvency judgments have been issued, or any crime affecting honor, against any of the founders.

6-3-1. A statement of the proposed name of the bank in Arabic and foreign languages, accompanied by a certificate of non-conflict issued by the Ministry of Supply and Internal Trade (Commercial Register).

7-3-1. The bank's objectives, duration, and address of its headquarters.

8-3-1. A financial and economic feasibility study of the bank for a period of no less than five years, including in particular:

1. The services the bank will provide.
2. A market study demonstrating the bank's ability to mobilize savings and invest them, as well as the targeted number of customers.
3. The estimated budget and the bases and expectations upon which it was prepared.
4. The bank's work plan and expansion plan in its activities, the number of branches planned to be established in the Arab Republic of Egypt, and the plan for disseminating digital banking services.
5. The proposed organizational structure of the bank.
6. A human resources development plan and ways to develop career paths, including special training programs to increase security awareness among bank employees and customers to mitigate the risks of social engineering attacks.
7. The bank's policies, including at a minimum, investment policies.
8. A statement of the infrastructure and technological data for the electronic systems to be used in accordance with the products and services to be provided, including:
   • Core Banking Systems.
   • ATMs and their systems and their security plan.
   • Cloud Hosting/Computing, mentioning the data stored, if any.
   • An approved certificate stating the suitability, efficiency, and effectiveness of the bank's ATM system and its ability to support the activities of the systems used for the services and products to be provided, as well as the application of direct technical linkage with the systems.
   • A plan for monitoring and combating security incidents, clarifying the mechanisms and procedures to be followed, including securing the personal and credit data of bank employees and customers, and the necessary requirements to secure the infrastructure of the systems.
9. The competence and clarity of the internal supervision, risk management, and governance plans, as well as the work systems and governance, and the plan for implementing sustainable financing and leasing rules and the policy to be followed in disposing of assets, including:
   • The cybersecurity strategy and the general risk management policy related thereto.
   • A plan to implement security audit procedures on all systems, whether through internal audit management or an external company.
   • A business continuity plan necessary to ensure the continuity of providing various services at the bank.

9-3-1. In the case of a bank in the form of an Egyptian joint-stock company following a foreign financial institution, the following must be provided:

1. The services that the headquarters of the foreign financial institution will provide on its behalf, if any.
2. The applications and systems related to screening names against negative lists and combating money laundering and terrorist financing locally and globally (transfer applications, Know Your Customer applications, and applications for monitoring high-risk transactions related to customers).
3. Any other documents requested by the Central Bank.

3-2. For a foreign bank branch:

1-3-2. Approval of the headquarters of the foreign bank branch to establish a branch in the Arab Republic of Egypt.

2-3-2. Approval of the competent authority in the country where the headquarters is subject to supervision to open the branch, with its affirmation that the bank (1) is licensed to operate, (2) maintains a sound financial center, and (3) commits to the mechanisms and supervisory controls applied by that authority.

3-3-2. Proof that none of the founders, main shareholders, members of the Board of Directors, or ultimate beneficiaries are listed on the sanctions lists (local and international).

4-3-2. A financial and economic feasibility study for the next five years for the branch, as well as work plans and expansion plans in its activities and the number of branches planned to be established in the Arab Republic of Egypt.

5-3-2. A copy of the Articles of Association of the headquarters, certified by the competent authority subject to which it is supervised, accompanied by an Arabic translation from one of the approved translation offices.

6-3-2. A copy of the financial statements of the bank for the last five financial years and the reports of the auditors thereon.

7-3-2. The services that the headquarters of the foreign financial institution will provide on its behalf, if any.

8-3-2. The applications and systems related to screening names against negative lists and combating money laundering and terrorist financing locally and globally (transfer applications, Know Your Customer applications, and applications for monitoring high-risk transactions related to customers).

Commitments Required from the Headquarters of the Foreign Bank Branch:

1-4-2. An unconditional guarantee from the headquarters of the foreign bank branch for all deposits at the branch and the rights of creditors and all other obligations of the branch; with the commitment of the headquarters to compensate the branch for any losses that may arise from its financial statements for any past year, which may lead to non-compliance with the minimum regulatory requirements, especially those related to the capital adequacy standard, within a period not exceeding three months from the date of approval by the branch's auditors of these statements.

2-4-2. Commitment of the branch to Egyptian laws, regulations, and decisions in force, and the instructions issued by the Central Bank.

3-4-2. A power of attorney issued by the headquarters in the name of the manager responsible for the branch and his deputy, certified by the Egyptian Ministry of Foreign Affairs, and obtaining the approval of the Governor of the Central Bank for both before appointment.

4-4-2. The competence and clarity of the strategy and policy to be followed, as well as governance and internal supervision plans, risks, and the plan for implementing sustainable financing rules, in addition to work systems and procedures for all branch activities.

5-4-2. The proposed organizational structure of the foreign bank branch in the Arab Republic of Egypt and its plan for establishing branches, as well as the human resources development plan and ways to develop career paths.

6-4-2. Any other documents requested by the Central Bank.

4. Procedures for Licensing the Bank and the Foreign Bank Branch:

4-1. For the Bank:

1-4-1. A request for the license of the bank, which has obtained preliminary approval, must be submitted to the Governor of the Central Bank, and the necessary steps for establishment must be taken within one year from the date of notifying the key personnel of the mentioned decision, otherwise the approval will be considered as if it did not exist. The Board of Directors of the Central Bank may extend this period for a similar period from the date of expiration of the preliminary approval for establishment.

2-4-1. A bank deposit certificate stating the deposit of an amount of at least 5 billion pounds or its equivalent in free currencies for the bank's capital account.

3-4-1. A copy of the tax card and commercial register of the bank.

4-4-1. A copy of the founding contract of the bank and its Articles of Association, and the page published with the establishment decision.

5-4-1. A statement of shareholders, clarifying the related parties, to the extent that ensures identification of the ultimate beneficiary and verification of the legitimacy of the source of funds.

6-4-1. A statement of the names and data of the main shareholders (members of the Board of Directors and senior managers responsible for the main and supervisory activities) according to the forms prepared for this purpose, and subject to meeting the conditions of competence and technical qualification required for senior officials.

7-4-1. A certificate of non-conviction for bankruptcy, insolvency, or any crime affecting honor from the Ministry of Justice against any of the founders or candidates for membership in the Board of Directors and ultimate beneficiaries who hold Egyptian nationality.

8-4-1. The names of the bank's auditors, who must be among those registered in the register of auditors at the Central Bank.

9-4-1. A statement of the equipment, facilities, and real estate necessary for its operations, with compliance with what was stated in the instructions regarding security policies and procedures for securing the banking system issued in May 2018.

10-4-1. Proof of payment of an inspection fee for the bank amounting to five hundred thousand pounds for the headquarters, fifty thousand pounds for each branch, and one hundred thousand pounds for each agency or small branch.

11-4-1. The date of submission of the request, accompanied by the required documents. The Board of Directors may extend this period for another similar period.

12-4-1. The license applicant must notify the Central Bank of Egypt immediately in the event of any change in the data provided in the license request.

13-4-1. The decisions issued by the Board of Directors of the Central Bank regarding the license are published in the Egyptian Gazette for the benefit of the licensed bank, in addition to the Central Bank's website.

4-2. For the Foreign Bank Branch:

1-4-2. A request for the license of the foreign bank branch, which has obtained preliminary approval, must be submitted to the Governor of the Central Bank, and the necessary steps for establishment must be taken within six months from the date of notifying the key personnel of the mentioned decision, otherwise the approval will be considered as if it did not exist. The Board of Directors of the Central Bank may extend this period for a similar period from the date of expiration of the preliminary approval for establishment.

2-4-2. A bank deposit certificate stating the transfer of an amount of no less than fifty million US dollars or its equivalent in free currencies for the capital account of the foreign bank branch, to be allocated for conducting its activity in the Arab Republic of Egypt.

3-4-2. A copy of the tax card and commercial register.

4-4-2. A statement of shareholders of the foreign bank or foreign financial institution, clarifying the related parties, to the extent that ensures identification of the ultimate beneficiary and verification of the legitimacy of the source of funds.

5-4-2. A statement of the names of the manager responsible for the branch and his deputy and the senior managers responsible for the main and supervisory activities according to the forms prepared for this purpose, subject to meeting the conditions of competence and technical qualification required.

6-4-2. A certificate of non-conviction for bankruptcy, insolvency, or any crime affecting honor from the Ministry of Justice against any of the candidates for the positions of senior executive officials who hold Egyptian nationality.

7-4-2. The names of the auditors, who must be among those registered in the register of auditors at the Central Bank.

8-4-2. A statement of the equipment, facilities, and real estate necessary, with compliance with what was stated in the instructions regarding security policies and procedures for securing the banking system issued in May 2018.

9-4-2. Proof of payment of an inspection fee amounting to twenty-five thousand US dollars for the headquarters, ten thousand US dollars for each additional branch, and five thousand US dollars for each agency or small branch.

10-4-2. The request for the license is submitted to the Board of Directors of the Central Bank for a decision thereon according to the cooperation policy agreed upon between the Central Bank and the competent authority in the country where the headquarters of the foreign bank to which the branch belongs is located, for coordination between them in the field of supervision and oversight. The decision on the request must be issued within ninety days from the date of its submission, accompanied by the required documents mentioned above. The Board of Directors may extend this period for another similar period.

11-4-2. The license applicant must notify the Central Bank of Egypt immediately in the event of any change in the data provided in the license request.

12-4-2. If the applicant fails to fulfill what is required of him within ninety days from the date of the mentioned notification, he forfeits his right to this request.

13-4-2. The decisions issued by the Board of Directors of the Central Bank regarding the license are published in the Egyptian Gazette for the benefit of the licensed bank, in addition to the Central Bank's website.

14-4-2. In the event of rejection of the license request by a decision of the Board of Directors of the Central Bank, the applicant is notified thereof within thirty days from the date of its issuance.

5. Registration of the Bank or Foreign Bank Branch:

The registration includes the following data:

1. Registration number and date of the Board of Directors' decision.
2. The full and abbreviated name of the bank or foreign bank branch in Arabic and foreign languages.
3. The legal form of the bank.
4. The date of establishment.
5. The date of commencement of activity.
6. The original and renewed duration of the bank.
7. The number and date of the page of the Egyptian Gazette in which the decision of the Board of Directors of the Central Bank of Egypt approving the license is published.
8. The authorized and paid-up capital of the licensed bank or the capital allocated for the activity of the foreign bank branch in the Arab Republic of Egypt.
9. The legal reserve and other bank reserves or any reserves allocated for the foreign bank branch in the Arab Republic of Egypt.
10. The bonds and financing instruments issued or to be issued by the bank or foreign bank branch, their maturity dates, and the supporting financing and its terms.
11. The network of branches of the bank in the Arab Republic of Egypt or the network of branches of the foreign bank branch in Egypt.
12. The network of branches of Egyptian banks abroad.
13. The financial subsidiaries of the Egyptian bank abroad.
14. The representative offices of the Egyptian bank abroad.
15. A statement of the names and data of the main representatives, according to the forms prepared for this purpose.
16. The names and data of the manager responsible for managing the foreign bank branch in the Arab Republic of Egypt and the executive representatives, according to the form specified for this purpose.
17. The names of the auditors.

Any modifications to the previous data are registered on the form prepared for this purpose.

Approval of the Governor of the Central Bank of Egypt must be obtained before proceeding with the establishment of each branch or agency and before the opening and practice of the branch or agency's banking activities.

6. Modification of Registration Data:

The procedures for modifying registration data are subject to the following:

1. The bank must notify the Central Bank of any modification it intends to make in the founding contract or Articles of Association. The modification cannot be submitted to the General Assembly (in cases requiring Assembly approval) except after obtaining preliminary approval from the Central Bank. The modification is not implemented except after approval by the General Assembly, its approval by the Board of Directors of the Central Bank, and its endorsement in the Banks Register.
2. Notification must be made of any modification in the data provided when requesting registration. The notification is submitted according to the "Request to Modify Bank Registration Data" form, supported by the necessary documents. The modification is not implemented except after the approval of the Central Bank and its endorsement in the Banks Register. It is prohibited to announce any modifications contained in the requests submitted to the Central Bank before notifying the concerned bank of the Central Bank's approval and its endorsement in the Banks Register.
3. The Central Bank notifies the bank requesting the modification of the approval decision for the modification within fifteen days from the date of issuance of the decision by any means approved by the Central Bank.

Second: Licensing and Registration of a Representative Office of a Foreign Bank in the Arab Republic of Egypt

1. Conditions for Licensing a Foreign Bank Representative Office:

The Governor of the Central Bank, after approval by the Board of Directors of the Central Bank, may license the foreign bank to open a representative office for it in the Arab Republic of Egypt under the following conditions:

1. It must not have a branch in the Arab Republic of Egypt.
2. Its headquarters must be subject to the supervision of the corresponding competent authority in the country where it is located, and the approval of that authority must be obtained to open a representative office in the Arab Republic of Egypt.
3. The activity of the representative office must be limited to studying markets and investment opportunities, and serving as a link between its headquarters abroad and the bank registered with the Central Bank or other entities it deals with, and contributing to resolving problems and difficulties that may face the bank as a correspondent in the Arab Republic of Egypt.
4. This office is not allowed to conduct any banking business or commercial activities, including but not limited to commercial agency activities and financial brokerage activities.

2. Documents Required to Open a Representative Office:

A request to obtain a permit to open a representative office for a foreign bank in the Arab Republic of Egypt must be submitted to the Central Bank before taking registration steps, accompanied by the following documents:

1. The approval issued to open the representative office in the Arab Republic of Egypt.
2. Proof that the bank represented by the office is subject to the supervision of the competent supervisory authority in the country where it is located, and that this authority approves the opening of the office in the Arab Republic of Egypt.
3. A copy of the bank's Articles of Association, certified by the competent authority in the country to which it is subject, accompanied by an Arabic translation from one of the approved translation offices. Copies of the bank's financial statements for the last two financial years and the auditors' reports thereon.
4. A special power of attorney from the bank to the manager responsible for managing the office, including his name and nationality, and certified by the Egyptian Ministry of Foreign Affairs.
5. A report from the bank submitting the request, clarifying its strategy and the office's work plan, and an economic study including the feasibility and objectives of its opening.
6. In the event that the bank represented by the representative office is rated "A" or higher by one of the global financial rating agencies (Fitch Ratings, Moody's, S&P), proof thereof must be provided.
7. A commitment from the bank represented by the representative office that the office will comply with Egyptian laws, regulations, decisions in force, and instructions issued by the Central Bank, and to notify of any modifications to the registered data.
8. Obtaining the approval of the Governor before appointing the manager responsible for managing the representative office, and ensuring that the conditions of competence and technical qualification required for senior officials are met.

3. Registration of the Representative Office:

The Central Bank is notified, accompanied by proof of payment of a registration fee of twenty thousand US dollars. The office is not allowed to conduct business in the Arab Republic of Egypt except after being notified by a decision from the Governor to include it in the mentioned Register. The Register includes the following data:

1. The name and address of the office.
2. The name of the bank represented by the office, its nationality, and the address of its headquarters.
3. The name of the manager responsible for managing the office and his nationality.
4. The number and date of registration of the office with the Central Bank.
5. The date and number of the entry of the office in the Commercial Register.
6. The date of commencement of the office's activity in the Arab Republic of Egypt.

The representative office is subject to the supervision of the Central Bank, and it has the right to access the records related to it at any time and request data that achieve the purposes of supervision and oversight.

4. Modification of Registration Data for the Representative Office:

The representative office must notify the Central Bank of the following:

1. Any legal or administrative changes affecting the bank represented by the office, along with copies of the approved balance sheets after their publication, as well as the annual reports issued by the Board of Directors.
2. Any modifications to its data (name of the office in the Arab Republic of Egypt resulting from a change in the name of the bank abroad or any data in the Register at the Central Bank). This requires submitting a request to modify registration data on the form "Request to Modify Registration Data of the Representative Office", accompanied by the following documents:
   1. A letter from the bank requesting approval to modify the registration data of the office in the Arab Republic of Egypt.
   2. Approval from the supervisory authority in the country of the headquarters in the event of modifying the name of the office according to a change in the name of the bank abroad.
   3. The power of attorney issued by the bank abroad to modify the name of the manager responsible for managing the office in the Arab Republic of Egypt, and that the office continues its activity and complies with the provisions of the Central Bank and Banking System Law.
   4. A commitment from the bank abroad to notify the supervisory authority in the country of its headquarters of any fundamental modifications that may affect the registration data of the office in the Arab Republic of Egypt.
   5. A commitment to notify the General Authority for Investment and Free Zones of modifications affecting the office's data related to its licensing.

Third: Cancellation of License, Partial or Full Suspension of Operations, and Deregistration

1. No bank is allowed to suspend its operations partially or fully except with a reasoned approval from the Board of Directors of the Central Bank. The approval for full suspension is issued after verifying that the bank has provided sufficient guarantees or fully discharged its legal obligations; in particular, its obligations to depositors and other creditors and the rights of employees.

2. The license of the bank may be cancelled and its registration deregistered by a decision of the Board of Directors of the Central Bank in the following cases:

   1. If it commits a serious or repeated violation of the provisions of the Central Bank and Banking System Law mentioned above or the decisions issued in implementation thereof, and fails to remove the violation within the period and under the conditions determined by the Board of Directors of the Central Bank.
   2. If it adopts a policy that harms the general economic interest, public safety, the banking system, or the interests of depositors.
   3. If it ceases to conduct its activity or submits a request to cease its activity and liquidate it voluntarily.
   4. If any of the conditions for considering the bank distressed are met and the Central Bank deems it inappropriate to settle the affairs of the distressed bank and prefers its liquidation.
   5. If it is proven that the license for the bank was based on false data provided to the Central Bank.
   6. If it fails to meet any of the licensing conditions.
   7. If a fundamental change occurs in the data upon which the license was based.
   8. If the bank fails to commence its operations within twelve months for a bank in the form of an Egyptian joint-stock company and six months for a foreign bank branch, from the date of obtaining the license or ceasing to accept deposits after starting to conduct its banking activities.
   9. If the bank is merged into another bank or all or most of its assets are sold.
   10. If the headquarters of the foreign financial institution to which the Egyptian joint-stock company or foreign bank branch belongs ceases to conduct deposit-taking activities.
   11. In addition to what preceded...

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