The Central Bank of Egypt (CBE) issued, on Monday, new instructions to banks working in the local market regarding deferred loan instalments.
In a letter addressed to banks, the CBE directed for the appropriate measures to be put in place for customers whose cash flows have been affected by the novel coronavirus (COVID-19) crisis. This aims to reduce the burdens and pressures on customers, especially with regards to repaying loan instalments.
“Each bank must conduct a careful review of the existing credit facilities, and study the position of all customers and their future cash flows, with the aim of determining the appropriate measures that will be taken to deal with them,” the CBE said. “This is provided that these measures are in line with their ability to pay, and without representing a pressure on the companies’ liquidity to enable them to continue their business, as well as for individuals whose incomes were negatively affected.”
The CBE emphasised that banks can restructure clients’ debts with the aim of reaching a new credit facilities structure, commensurate with the customer’s current ability to repay. At the same time, banks should pay special attention to customers whose activities have been affected by the pandemic.
It stated that these should be implemented through a range of facilities, including increasing the period of granted facilities and restructuring the due instalments without calculating any fines.
This would occur in addition to a possible grace period for companies, taking into account their activities and future cash flows, and in a manner that does not affect their liquidity.
The CBE also stressed the need to adhere to the instructions issued regarding the principles of assessing customer creditworthiness. This would occur in addition to the formation of allocations issued in a decision by the CBE’s Board of Directors at a session held on 24 May 2005. It would also take into account the instructions issued on 26 February 2019, regarding the application of the International Financial Reporting Standard IFRS9, which considers the event of debt restructure and regularity in repayment.
The CBE instructions emphasised the need for each bank to study and analyse the overall risks associated with the current crisis. Banks are also requested to conduct stress tests to determine the impact of the crisis on the credit portfolio, as well as on various economic sectors, and set plans to deal with any potential losses.
