Highlights

On 1 July 2026, the Central Bank of Egypt (the “CBE”) issued a circular addressed to banks operating in Egypt (the “Circular”), setting out the decisions adopted by the CBE’s Board of Directors (“BoD”) at its session held on 17 June 2026 and establishing a set of rules limiting banks’ investments in corporate and securitisation bonds.

The Circular was issued in the context of the CBE’s continuous monitoring of the banking sector and its developments, and in light of the recent unprecedented growth in banks’ investments in bonds. It aims to establish an effective supervisory framework for limiting the rising risks associated with this type of investment, especially risks arising from investments in real estate securitisation bonds backed by receivables arising from undelivered units.

Scope of Application

The Circular limits banks’ investments in both:

• corporate bonds; and
• securitisation bonds.

The requirements under the Circular address banks’ internal governance, concentration limits, capital treatment, due diligence, ongoing monitoring, and the interaction of bond investments with banks’ other exposures to the same obligor.

Key Requirements:

• Board-Approved Internal Policies
  
  Banks’ internal policies must include controls governing investment in bonds. Such policies must be approved by the bank’s BoD and provided to the CBE, and must include:
  
  • maximum limits for the bank’s total investments in bonds relative to each of the bank’s credit portfolio and investment portfolio;
    
  • maximum limits at the level of each single sector out of the bank’s total investments in bonds;
    
  • a maximum limit for the bonds of a single issuing company relative to the total corporate bonds portfolio, as well as a maximum limit for the securitisation bonds of a single originating company relative to the total securitisation bonds portfolio; and
    
  • a minimum acceptable credit rating for bonds, which may not be lower than BBB-, as well as a maximum limit for their tenors.

• Concentration Limits

Banks must ensure that their investments in corporate bonds and securitisation bonds of each company are included within the bank’s total exposures when calculating the maximum limit for the bank’s exposures to a single client and that client and its related parties.

• Risk Weights

Banks must apply the following risk weights to their investments in corporate bonds and securitisation bonds:

• Comprehensive Study and Due Diligence

Banks must prepare a comprehensive study on all bonds in which they intend to invest, identifying all risks that may affect the expected cash flows. Such study must include an assessment of the creditworthiness of the originating/issuing company, based on a review of the available financial and non-financial information.

• Ongoing Monitoring and Reporting

Banks must put in place procedures and controls for monitoring the performance indicators of all bonds, and must prepare quarterly reports on the results, to be presented to the bank’s risk committee, which shall, in turn, submit its recommendations to the BoD.

• Auditor’s Certificate

Banks must obtain a certificate from the auditor confirming the compliance of the originating/issuing companies with the maximum ratio of the value of due instalments to the monthly income of individuals, as prescribed by the CBE pursuant to its circular dated 19 December 2019, with respect to the companies to which such limit applies.

• Real Estate Securitisation Bonds

Banks must ensure that securitisation bonds relating to real estate development companies or real estate finance companies are backed by receivables arising from units that have been actually delivered to their purchasers.

• FRA Letter

The Circular reiterates the requirement set out under the CBE’s circular letter dated 24 September 2025 to obtain a letter from the Financial Regulatory Authority (the “FRA”) prior to any placement, including the granting or renewal of credit facilities and securitisation transactions, with any company subject to the FRA’s supervision, confirming the soundness of the company’s performance, its compliance with the standards and rules governing the conduct of its activities as prescribed by the FRA, and the absence of any outstanding violations or administrative measures or sanctions.

• Guaranteeing Bond Issuances

The Circular further reiterates the requirement set out under the CBE’s credit granting rules to obtain the prior approval of the CBE before guaranteeing bonds issued by companies and institutions, together with the submission of a comprehensive study in this regard, including the cash flows of the company or institution issuing the bonds, as well as those of the originator of the securitisation portfolios.

In this regard, banks may not invest in bonds issuances in respect of which they have issued letters of guarantee for the same issuance.

• Grace Period

Banks are granted a period of six (6) months from the date of issuance of the Circular to align their positions with the new requirements.

Implications

The Circular aims to:

• establish formal, board-approved governance over banks’ investments in corporate bonds and securitisation bonds;
  
• introduce concentration limits at the portfolio, sector, and single issuer/originator levels;
  
• impose explicit rating-based risk weights on bond investments, with higher capital charges for lower-rated instruments, alongside a minimum acceptable credit rating of BBB-;
  
• strengthen due diligence, ongoing monitoring, and reporting to banks’ risk committees and BoD’s;
  
• limit delivery risk in real estate securitisations by prohibiting banks from investing in securitisation bonds backed by receivables arising from undelivered units; and
  
• prevent the accumulation of risks by prohibiting banks from investing in bond issuances for which they have issued letters of guarantee.

Conclusion

The Circular establishes a comprehensive supervisory framework governing banks’ investments in corporate bonds and securitisation bonds, combining board-approved internal policies and concentration limits with rating-based risk weights, a minimum credit rating requirement, enhanced due diligence, and ongoing monitoring and reporting obligations. The Circular is expected to strengthen prudential oversight of banks’ bond investment portfolios while mitigating concentration, credit and delivery risks associated with such investments.

The contributors to this article are Hossam Gramon, Partner and Head of Banking and Project Finance, Nour Osama, Associate, and Karim Madian, Junior Associate.