CBE issues instructions to banks on open positions on LCs below USD5mn and FX corporate lending post devaluation
The Central Bank of Egypt (CBE) requested banks to reconsider the limits they have on credit facilities granted to companies to finance imports and working capital, so as to match the difference in the exchange rate since EGP’s flotation. The CBE issued instructions last Thursday to banks regarding the incremental debt owed by companies resulting from the FX difference post EGP devaluation. The CBE granted USD420mn to cover the debts of companies that owe less than USD5mn of letters of credit and with revenues of maximum EGP500mn. As for the companies that are not interested in benefitting from these measures or do not meet the 2 criteria above, they will be granted an interest rate on their monetary coverage in local currency by the same overnight deposits minus 1% (currently at 13.75%). The loans of these companies will bear an interest rate on their USD lending equivalent to the rate of USD T-bills (at 3.62% per year). CBE instructed banks not to list (we understand downgrade) any of the companies that received temporary facilities in foreign currency, including the troubled companies, and granting them a grace period to adjust, unless the client shows no intention of paying. If one company deals with several banks, the CBE will instruct these banks to coordinate under the supervision of the bank that is owed the most by the company. Moreover, each bank will conduct a credit study for each client individually to restructure their debts.
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