The Central Bank of Egypt (CBE) has obliged banks to obtain prior written approval from the Ministry of Finance before granting any credit facilities to public business sector companies.
The CBE said the recent instruction received by banks comes in light of the government’s aim to determine the size of the loans granted by banks to public business companies.
In a related context, the CBE set new protocols for banks operating with companies engaged in the funding of instalment sales.
These rules are currently in place owing to the fact that these companies are not subject to any regulatory body, which may result in higher risk rates and increased incidences of irregularities, the CBE explained.
The CBE also stipulated that the funding of these companies should only be in local currency, taking into account the terms of the companies’ portfolios, in order to avoid mismatched deadlines.
It stressed that banks must ensure that shops, commercial outlets, companies operating in the field of funding of instalment sales, which provide payment facilities for the purchase of consumer goods, and car companies, must apply the 35% rate when dealing with their customers.
In addition, the CBE asked the banks to obtain reports approved by an accountant annually from these companies to confirm the existence of clear policies and effective controls of the premium values based on the individual’s monthly income.
It also demanded that banks be included as contract entities concluded between them and companies to review incoming credit reports obtained from iScore, as a means to analyse the customer’s payment behaviour and then to evaluate it, along with providing quarterly statements to the CBE, which include total credit facilities and their terms for those companies.
Banks operating in the local market are holding intensive meetings as of this week to discuss future lending controls to these companies, and their impact on the concession of any future loans.