The CBE Requires the Application of

On 28 January 2018, the Deputy Governor of the Central Bank of Egypt (“CBE”) issued a circular[1] to all banks operating in Egypt containing the CBE’s Board of Director’s decision dated 17 January 2018 regarding the steps that banks must undertake in preparation for applying International Financial Reporting Standard (“IFRS”) 9 on expected credit risk provisioning. The CBE had previously set 1 January 2018 as a deadline for beginning to apply the aforementioned standard. In addition, the Bank sent out a questionnaire on 28 August 2017 in order to assess the readiness of banks in Egypt for the application of IFRS 9 by the set deadline. In light of the above, the CBE’s Board of Directors decided in its last meeting that 1 January 2019 shall be the application deadline (1 July 2019 for banks that prepare their financial statements midyear). It also ordered banks to submit to the CBE a plan for the application of the standard, as well as monthly reports on said application. The latest circular delineates other rules and procedures which must be undertaken in application of IFRS 9. Furthermore, the circular mandates that banks provision an IFRS 9 risk reserve equal to 1% of total expected credit risk weighting from net 2017 profits after taxation. This provision is to be deemed part of capital base, and a bank may not use said provision except with the approval of the CBE. The CBE’s circular also pointed out that final instructions concerning the application of IFRS 9 will be sent to banks at a later date.   [1] CBE Circular dated 28 January 2018 regulating the implementation of IFRS 9, available through this link (Arabic).