Back to the complete issue
Tuesday, 9 April 2019

Egypt’s banks need to set aside additional capital for credit concentration risks

New requirements from Central Bank of Egypt on management of portfolio concentration risk: Commercial banks are now required to set aside additional capital above the base requirement to hedge against concentration risk in their loan portfolios, according to new CBE guidelines (pdf). The ratio for each bank will depend on measurements of key concentration measures, which are either based on extending too much credit to borrowers in a single sector (sectoral concentration) or to a single borrower (individual concentration). Risk management departments also need to develop a clear policy tackling these risks.

The central bank has also made it easier for lenders to factor real estate invoices: Another regulatory decision taken by the central bank yesterdayinvolves excluding real estate bank factoring from a ceiling recently applied to personal debt collection, according to a circular dated 7 April (pdf). This means that banks that collect payments from customers of real estate developers who have factored receivable assets (i.e. postdated checks or invoices for installments) will not adhere to the recently mandated maximum debt-to-income ratio for personal loans. The maximum ratio set in 2016 specified that the value of interest payments for consumer and housing loans must not exceed 35-40% of the borrowers income.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Etisalat Misr (tax ID: 235-071-579), the leading telecoms provider in Egypt; and Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt.