Circular Letter dated 1 July 2026 Regarding Controls on Banks' Investments in Corporate and Securitization Bonds

Cairo on: 1 July 2026

Dear Mr. Chairman,

Greetings,

In the context of the Central Bank's continuous follow-up of the banking sector and its developments, and in light of the growth in banks' investments in bonds recently, whether corporate bonds or securitization bonds, and working to establish an effective supervisory framework for managing all risks associated with this type of investment, which positively reflects on the integrity and stability of the banking sector, the Board of Directors of the Central Bank decided in its session held on 17 June 2026 the following:

Banks must comply with the following when investing in bonds (corporate bonds and securitization bonds):

1. The relevant internal policies must include controls for investing in bonds, which are to be approved by the Bank's Board of Directors and submitted to the Central Bank, including as a minimum:
   1.1 Setting maximum limits for total investments in bonds relative to the Bank's credit portfolio and its investment portfolio.
   1.2 Setting maximum limits at the level of a single sector from the Bank's total bond investments.
   1.3 Setting a maximum limit for bonds of a single issuing company relative to the total corporate bond portfolio, and a maximum limit for securitization bonds of a single originator relative to the total securitization bond portfolio.
   1.4 Setting a minimum acceptable credit rating for bonds (not less than BBB-) and a maximum limit for their maturity.

2. Ensuring that the Bank's investments in corporate bonds and securitization bonds for each company are included in the total exposures, when calculating the maximum limit of the Bank's exposures to a single client and the client and related parties.

3. Using the following tables to determine the risk weights for investments in corporate and securitization bonds:

Credit Rating for Long-Term Bonds
AAA: 100%
AA+ to AA-: 150%
A- to A+: 200%
BBB+ to BBB-: 300%

Credit Rating for Short-Term Bonds
A-3/P-3: 150%
A-2/P-2: 200%
A-1/P-1: 300%

4. Preparing a comprehensive study on all bonds intended for investment and identifying all risks that may affect expected cash flows, including an assessment of the creditworthiness of the originator/issuer through studying available financial and non-financial data.

5. Establishing procedures and controls to continuously monitor the performance indicators of all bonds, with quarterly reports on the results presented to the Bank's Risk Committee, which in turn raises recommendations to the Board of Directors.

6. Obtaining a certificate from the auditor confirming that the originator/issuing companies comply with the maximum limit for the ratio of due installments to the individual's monthly income (prescribed by the Central Bank pursuant to the Circular Letter dated 19 December 2019), for companies required to apply this limit.

7. Ensuring that securitization bonds of real estate development companies or real estate financing companies are delivered to their buyers.

8. Emphasizing compliance with the provisions of the Circular Letter dated 24 September 2025 regarding the necessity of obtaining a letter from the Financial Regulatory Authority before exposure (granting/renewing credit facilities, securitization operations, etc.) for all companies subject to the Authority's supervision, confirming the sound performance of those companies and their compliance with the standards and rules for conducting the activity specified by the Authority, and the absence of any existing violations or administrative measures or penalties.

9. Emphasizing compliance with the credit granting controls regarding the necessity of obtaining prior approval from the Central Bank of Egypt when guaranteeing bonds issued by companies and institutions, with a comprehensive study submitted in this regard including the cash flows of the company or institution issuing the bonds and the originator of the securitization portfolios, while noting not to invest in bonds if the Bank issues guarantee letters in favor of the same issuer.

10. Banks are granted a six-month compliance period from the date of issuance of the instructions.

Please be informed and alerted to take the necessary action to implement the aforementioned decision.

Accept our highest respect and appreciation,

Tarek El-Khouly