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Tuesday, 4 December 2018

FRA sets framework for short-term bonds, instruments

REGULATION WATCH- Aiming to create a market for corporate paper in Egypt, FRA sets framework for short-term bonds, debt instruments: The Financial Regulatory Authority (FRA) has defined the framework and regulations governing short-term debt instruments, including bonds, sukuks, and other securities with maturities of less than two years, FRA boss Mohamed Omran said, according to Youm7. The regulations specify the approved issuers and buyers, and allow the bonds to be made public through the EGX.

Who can now issue bonds? Joint-stock and limited liability companies, other companies licensed by the FRA, commercial banks, qualified global financial institutions (such as the EBRD and IFC) and even SMEs are allowed to issue bonds. Banks, insurance companies and funds, qualified private investors and funds, pension funds, and companies with FRA approval can purchase them.

The framework: The issuer must present financial statements going back at least two financial years back and audited by an FRA-listed auditor. They must also possess a bond credit rating of at least BBB- (or an equivalent) and must appoint a FRA-approved lead manager who should ensure buyers are in good financial standing. Qualified buyers must be solvent and, in the case of individual investors, at least three years of investing, banking or finance experience.

Background: Amendments to the executive regulations of the Capital Markets Act, which were approved in May, opened the door to the issuance of short-term bonds, along with short-selling, sukuk, and commodities and futures exchanges. The FRA had said earlier, however, that it was planning to introduce a separate regulatory framework for short-term bonds.

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