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6:08 pm
Monday 14 September 2020
I wrote – Manal Al-Masry:
The Central Bank issued new instructions to the banks coinciding with the end of the 6-month delay in the credit rights of the clients during the current month of September, and the beginning of the collection of these benefits by the banks.
The central bank had instructed the banks, in mid-March, to postpone the payment of installments of credit rights to all clients for a period of 6 months from the date of issuance of the decision as part of a package of measures to face the repercussions of the spread of the new Corona virus.
In the circular, issued on Monday, the Central Bank said that these instructions arise from the bank’s monitoring of economic conditions and work to stabilize the banking sector, with the aim of continuing to support clients whose cash flows have seen affected during the current crisis.
The central bank added that banks must adhere to the following:
1- Each bank must carry out an exhaustive review of the existing credit lines, and study the position of all the clients and their future cash flows, in order to determine the appropriate measures that will be taken to deal with them.
The Central indicated that these measures must be in line with the payment capacity of customers, and without putting pressure on the liquidity of the companies so that they can continue with their business, as well as the people affected by their negative entry.
2- Bank restructuring of clients’ debts in order to achieve a new structure of credit lines in accordance with their current repayment capacity, paying special attention to clients whose activities were affected during the previous period, provided that it is done through one of the following alternatives, for example, but not limited to:
– Increase in the duration of credit facilities.
Restructuring of payments owed without calculation of fines.
Capitalization of the value of returns.
The possibility of granting a grace period to companies based on the nature of their activities and future cash flows in a way that does not affect their liquidity.
3- The need to adhere to the instructions issued on the principles of evaluation of the credit quality of customers and the constitution of provisions issued by decision of the Board of the Central Bank in its session of May 24, 2005, as well as the instructions issued on February 26, 2019 on the application of the International Financial Reporting Standard (IFRS9).
The Central Bank pointed out the need to take into account that in case of debt restructuring and regular payment, without the client having financial difficulties, this is not considered an indicator of the substantial increase in credit risk.
4- The need for each bank to study and analyze the global risks associated with the current crisis, carry out stress tests to determine the impact of the crisis on the credit portfolio, as well as on the different economic sectors, and develop plans to make against possible losses.
