The Financial Regulatory Authority (FRA) issued a decision on Sunday regarding the development of financial solvency standards for companies licensed to engage in real estate finance, financial leasing, factoring, and consumer financing activities.
This will be done by taking all the necessary measures to enhance the flexibility and resilience of the authority’s affiliates against any future shocks in a way that enhances the levels of stability of non-banking financial markets.
The amendment also stipulates that the companies referred to in the first paragraph adhere at all times to the stipulated solvency ratios of no less than 12% instead of committing to them at the end of each quarter (4Q).
The decision came in response to what resulted from practice with some non-banking financing companies distributing profits, which resulted in a decrease in the first tranche of the companies’ capital base, and then a decrease in the capital adequacy ratio from the required minimum, which warns of the possibility of future risks.
Chairperson of the FRA Mohamed Farid said that introducing amendments to the financial solvency standards for non-banking financing companies aims to emphasise the need for companies to permanently adhere to the solvency ratios specified at 12% in order to measure the level of financial stability of institutions and donors for non-bank financing, which supports the authority’s ability to achieve market stability.
Farid added that the authority’s obligation to companies with adequacy ratios enhances their ability to continue their financing activities with proper management of credit and operational risks, as setting a permanent minimum standard for capital adequacy allows measuring the companies’ ability to face the risks associated with granting credit by setting a minimum level.
He explained that the adequacy of the financial resources of non-bank financing companies to fulfil their obligations on their due dates enhances levels of confidence in the sector and confirms the companies’ ability to perform their financing role in a stable manner.
