Highlights

On 24 September 2025, the Central Bank of Egypt (the “CBE”) issued a circular (the “Circular”) addressed to all banks operating in Egypt regarding their dealings with licensed non-banking financial institutions. The Circular reinforces the requirement for banks to obtain a letter from the Financial Regulatory Authority (the “FRA”) prior to:

• granting credit facilities;
• renewing existing facilities; or
• entering into securitisation transactions (collectively, the “Exposures”).

The FRA letter, to be obtained by the banks, shall confirm that the relevant non-banking financial institution is duly licensed, compliant with applicable laws and supervisory standards, and not subject to any violations or administrative sanctions. This measure consolidates earlier CBE instructions issued in October 2019 and February 2024, and introduces a unified process for all Exposures involving FRA-regulated entities, including microfinance institutions, financial leasing and factoring companies, and securitisation vehicles. 

The Circular aims to ensure that banks transact only with compliant institutions, enhance supervision between the CBE and FRA, and strengthen overall financial sector stability.

Scope of Application

The Circular applies to all banks in their dealings with entities subject to the FRA’s supervision, such as:

• licensed microfinance institutions;
• financial leasing and factoring companies;
• securitisation companies; and
• any other financial institution regulated by the FRA.

The obligation imposed on banks to obtain the FRA letter, by virtue of the Circular, shall apply to both new transactions and renewals of existing arrangements, and ensures that banks transact only with counterparties in good regulatory standing, as confirmed by the FRA.

Requirements

In compliance with the Circular, banks shall obtain an official confirmation letter from the FRA prior to entering into any Exposure. This letter must confirm that the relevant non-banking financial institution is duly licensed, compliant with applicable laws and regulations, not subject to any violations, sanctions, or administrative penalties, and operates in accordance with its licensed activities (e.g., microfinance, financial leasing, factoring, or securitisation). In the absence of such confirmation, banks are expressly prohibited from proceeding with the transaction.

Implications

The Circular aims to:

• strengthen oversight of the non-banking financial sector by coordinating supervision between the CBE and FRA;
• reduce credit and compliance risks by preventing Exposures with respect to institutions under sanctions; and
• encourage non-banking financial institutions to maintain compliance, as their access to bank financing will depend on FRA clearance.

Conclusion

The Circular highlights the CBE’s commitment to strengthening financial stability and promoting disciplined risk management. By mandating FRA confirmation prior to banks entering into or renewing Exposures to non-banking financial institutions, the Circular seeks to create a more transparent and compliant financial environment.

In practice, banks are advised to promptly update their credit and compliance procedures to make obtaining FRA confirmation a mandatory step, before finalising any Exposure. Non-banking financial institutions, in turn, should maintain consistent compliance with FRA regulations, as their ability to secure bank financing shall now depend on the FRA’s confirmation of their good standing.

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