CBE introduces EGP 50m minimum capital, new compliance rules for credit guarantee companies

The Central Bank of Egypt (CBE) Board of Directors has issued new regulations governing the licensing, regulation, and supervision of credit guarantee companies under the provisions of the Central Bank and Banking System Law No. 194 of 2020.

The new regulations establish a regulatory and supervisory framework for credit guarantee activities aimed at supporting the financial soundness of companies and enhancing the effectiveness of their governance, risk management, and internal control systems.

Under the licensing and registration rules, a company must be established as an Egyptian joint-stock company, with all its shares registered, and must have issued and paid-up capital of no less than EGP 50m.

The CBE also requires companies to maintain a clear ownership structure, including related parties, to ensure that ultimate beneficial owners can be identified and the legitimacy of the sources of funds verified. The licence must also be consistent with the state’s broader economic interests and must not undermine competition rules or measures aimed at preventing monopolistic practices.

The regulations require founders, ultimate beneficial owners, and key officials to demonstrate integrity, a good reputation, financial soundness, and appropriate experience.

Companies must also submit a financial and economic feasibility study covering the objectives behind establishing the company, the nature of its activities and services, an assessment of the market and target sectors, and methods for measuring and mitigating risks.

The rules further require companies to have a clear management strategy, as well as effective internal control, risk management, governance, and outsourcing systems.

Companies will remain fully responsible for activities outsourced to third-party service providers and technology service providers and must comply with the CBE’s relevant regulations governing such arrangements.

The rules also require companies to appoint a qualified and experienced assessment entity to evaluate the technical requirements of infrastructure, technology and IT systems, as well as information security.

Companies must also pay an annual supervisory fee of EGP 100,000 during January of each year.

The CBE has given credit guarantee companies one year to bring their operations into compliance with the new regulations. The compliance period will be extended to two years for information security and cybersecurity procedures and requirements, as well as prudential ratios.

The CBE also requires companies to submit to its Banking Supervision Department, within three months, a specific timetable for implementing the regulations. The timetable must include an assessment of existing gaps and the measures planned to address them.

The new rules aim to strengthen the regulatory framework governing credit guarantee activities and enhance the effectiveness of governance, risk management, and internal control systems, thereby supporting the soundness and stability of the sector.