Credit Guarantee Companies Face EGP 50 Million Capital Requirement
The Central Bank of Egypt has set licensing rules for credit guarantee companies, covering their legal structure, capital, ownership, governance and approval procedures. Paid-up capital must be at least EGP 50 million.
Requirements for Credit Guarantee Companies
Under the rules, a credit guarantee company must be established as an Egyptian joint-stock company with all shares registered in name. Its ownership structure, including related parties, must be transparent enough to identify the ultimate beneficial owner and verify the legitimacy of the source of funds.
The Central Bank also requires licensing not to conflict with the country’s economic interests or undermine competition and anti-monopoly rules. The proposed trade name must not be identical or confusingly similar to that of another company or establishment.
Applicants must submit a sound financial and economic feasibility study covering the company’s objectives, proposed activities and services, as well as a market study demonstrating its ability to attract resources and target specified sectors. The study must also address methods for measuring risks and potential losses and the tools available to hedge against them.
Governance and Risk Management
Founders, ultimate beneficiaries and key officials must meet requirements related to integrity, good reputation, financial solvency and relevant experience. The rules also require a clear and effective strategy, along with appropriate policies for operations, governance, management, risk management and internal controls.
Companies must maintain effective information technology systems and remain fully responsible for activities outsourced to service providers, technology providers and system operators, in accordance with Central Bank rules.
Applicants must also appoint a qualified and experienced entity to assess technical requirements related to infrastructure, technology systems, computers and information security.
Preliminary and Final Approval
The rules impose an annual supervisory fee of EGP 100,000, payable during January each year. Applicants seeking preliminary approval must submit their requests using the prescribed forms and attach the documents listed in Annex 1.
The application is referred to the Central Bank’s Board of Directors, which must decide within 90 days after all required documents have been submitted. The applicant must be notified of the decision within 15 days of its issuance.
Companies receiving preliminary approval must complete incorporation procedures within one year of notification, with the Board authorized to extend the period for another equivalent term. The company’s headquarters and branches are then inspected after payment of EGP 100,000 for the headquarters and EGP 50,000 for each branch.
The company subsequently applies for final licensing approval with the documents specified in Annex 2. The Board must decide within 90 days after completion of the required documents, with notification issued within 15 days.
Registration and Start of Operations
Upon final approval, the licensing decision is published in the Official Gazette, as well as on the Central Bank’s and licensed company’s websites, at the company’s expense. The company is also entered into the Central Bank’s Credit Guarantee Companies Register.
The company may not begin operations until it has been notified of final approval and registered in the designated register. It must commence operations within one year of the licensing decision, subject to a possible equivalent extension by the Board, and must notify the Central Bank at least one week before starting actual operations.
