Regulatory Alerts2012-05-13
Added · Updated
Controls and rules for bank financing for the acquisition of companies and controls for evaluating goodwill
The Central Bank of Egypt mandates that banks apply specific risk-weighting factors of 150% for strategic acquisitions and 200% for acquisitions by investment vehicles or risk-capital entities when calculating capital adequacy. Banks are prohibited from increasing total acquisition financing beyond 5% of their total loan portfolio, with a sub-limit of 20% for any single operation and related parties. The regulations require banks to adhere to strict valuation standards for goodwill, including a maximum recognition of 50% for non-strategic deals, and impose a one-year compliance deadline for existing acquisition financing arrangements.
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