Regulatory Alerts2022-10-27
Circular dated October 27, 2022 regarding financial derivatives linked to exchange rates
In response to the recent market volatility, the Central Bank of Egypt has announced several measures intended to stabilize foreign exchange markets and support Egyptian businesses. These include: Firstly, allowing local banks and financial institutions to engage in foreign exchange swap operations for corporations, provided that: - The objective is to cover the corporate locations resulting from previous trading activities and that this can be done exclusively through the Bank. - The Central Bank ensures that local banks can carry out these transactions only with domestic banks and that no restrictions are placed on conducting such operations in the future. - Forward non-deliverable forwards (NDFs) for corporations, individuals, or entities will also be permitted under certain conditions, namely: - That the goal of these operations is to cover corporate locations resulting from previous trading activities and that this can be done exclusively through the Bank with a commitment that no restrictions will be placed on such operations in the future. - These operations will only be conducted with domestic banks. - The transactions are settled solely in the local currency. These measures, **with the understanding that any guarantees given to corporations regarding the non-withdrawal of funds in foreign currencies shall not constitute a liability for the Central Bank and that no financing is provided to support foreign exchange operations not for legitimate purposes**, should be taken into consideration. Please accept our thanks for your prompt attention. Sincerely, Central Bank of Egypt