Circular dated October 27, 2022 regarding financial derivatives linked to exchange rates

Cairo: October 27, 2022

Dear Sir, Chairman of the Board of Directors,

Bank Tahya Misr
Greetings,

In light of current economic developments, and following the Central Bank's continuous monitoring of banks' operations, and with reference to the Circular Letter dated June 9, 2009, regarding the rules and regulations governing banks' dealings in forward foreign exchange operations (Forwards FX) linked to the Egyptian Pound, as well as the Circular Letter dated March 1, 2007, regarding the supplementary rules for the interbank foreign exchange market, the Central Bank has decided the following:

Regarding exchange rate-linked operations:

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First: Amendment of the Circular Letter dated June 9, 2009 to read as follows:

-1 Permission for banks to conduct forward foreign exchange operations (Forwards FX) for corporate clients, provided that the purpose is to cover client positions resulting from any of the following commercial operations carried out through the bank itself:

• Documentary credits.

• Collection documents.

• Supplier facilities.

• Specific-date remittances of foreign shareholders' dividends abroad.

• Proceeds from commodity and service exports received by bank clients, provided the bank obtains proof that the operation is commercial.

It must be ensured that clients are not permitted to conduct these operations for speculative purposes.

-2 Permission for banks to conduct forward foreign exchange operations with local banks for non-speculative purposes.

Second: Permission for banks to conduct foreign exchange swap operations (SWAPs FX) for corporate clients, provided that the purpose is to cover client positions resulting from any of the commercial operations previously mentioned in Item (First-1/) which are carried out through the bank itself, with emphasis on the ability to conduct the same operations with local banks only.

Third: Cancellation of what was stated in the Circular Letter dated March 1, 2007, regarding the prohibition of conducting any non-deliverable forward foreign exchange operations (NDFs - Non-Deliverable Forwards) for clients from banks, institutions, or individuals, and permitting banks to do the following:

-1 Conduct non-deliverable forward foreign exchange operations for corporate clients only, excluding individuals, provided that the purpose is to cover client positions resulting from any of the commercial operations previously mentioned in Item (First-1/) which are carried out through the bank itself, while observing the prohibition of conducting these operations for speculative purposes.

-2 Conduct the same operations with local banks for non-speculative purposes.

-3 Settle these operations in local currency only.

This, while observing what is stipulated in credit granting controls regarding the non-provision of any credit facilities to clients in foreign currency or financing any activity in foreign currency unless it is fully confirmed that clients have repayment sources in foreign currency, with their undertaking to use them for repayment.

Please be so kind as to alert regarding taking the necessary measures in this regard.

Please accept our highest respect,

Hassan Abdallah