Financial Regulatory Authority

FINANCIAL REGULATORY AUTHORITY

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— Chairman of the Authority —

Financial Regulatory Authority Board of Directors Decision No. (200) for the Year 2020 dated 27/12/2020

Regarding the Establishment of a Reserve to Mitigate Risks from the Impact of Applying Egyptian Accounting Standard No. (47) Financial Instruments on Certain Companies Engaged in Non-Banking Financial Activities

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Board of Directors of the Financial Regulatory Authority

Having reviewed the Mortgage Financing Law issued by Law No. (148) of 2001; and Law No. (10) of 2009 regulating supervision over non-banking financial markets and instruments; and Law No. (41) of 2014 regulating the activity of financing medium, small, and micro-enterprises; and the Law regulating the activity of financial leasing and privatization issued by Law No. (176) of 2018; and the Law regulating the consumer financing activity issued by Law No. (18) of 2020; and Prime Minister's Decision No. (1871) of 2020 concerning Egyptian Accounting Standards, as amended by Decision No. (69) of 2019 of the Minister of Investment and International Cooperation; and Financial Regulatory Authority Board of Directors Decision No. (162) of 2020 concerning the establishment of a reserve to mitigate risks from the impact of applying Egyptian Accounting Standard No. (47) Financial Instruments on insurance companies; and after approval by the Authority's Board of Directors in its meeting held on 27/12/2020;

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Decided

(Article One)

Companies engaged in mortgage financing, financial leasing, privatization, consumer financing, and financing of medium, small, or micro-enterprises are required to establish a reserve to mitigate risks from the impact of applying Egyptian Accounting Standard No. (47) Financial Instruments, equivalent to (1%) of total assets, funded from the net profits of the year after tax deduction for the financial year ending on 31/12/2020. This reserve shall be included within shareholders' equity and shall not be utilized except with the Authority's approval.

The company's board of directors must monitor compliance with the preceding paragraph and ensure verification of the following:

1- Providing the necessary requirements to implement the standard and removing any obstacles that may hinder execution. 2- Determining the business models to be used upon applying the standard. 3- Assessing the adequacy of information systems and the availability of human resources and expertise. 4- Developing the company's risk management environment and credit and investment policies. 5- Coordinating between the various departments within the company, including technical, financial, risk management, information technology, internal audit, and all other relevant departments.

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(Article Two)

This Decision shall be published in the Egyptian Gazette and on the Authority's official website.

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Chairman of the Board of Directors
Financial Regulatory Authority

Dr. Mohamed Omran

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Financial Regulatory Authority
Office of the Chairman

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Smart Village, Building 163, Giza - Egypt
Postal Code: 110
Tel: +202 3534535 - 02
Fax: +202 35370026
WWW.FRA.GOV.EG

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