Bank Insolvency, Recovery, and Resolution in Egypt: A Comprehensive Framework

Key Points

The New Banking Law Chapter 12 outlines the procedures for handling banks that are in financial distress. The Central Bank of Egypt (CBE) is designated as the authority responsible for regularizing the status of banks in financial distress.

Guiding Principles

• The CBE aims to maintain banking system stability
• Protect depositors’ interests
• Mitigate losses for creditors
• Avoid using public funds in resolution processes

Bank Financial Distress

A bank may be declared financially distressed if it meets certain criteria, including:

• Poor financial position
• Risk of depositor interests
• Failure to meet liabilities

Consequences

When a bank is declared financially distressed, the following consequences apply:

• Shareholder and Executive Suspension: Share distribution and executive disbursement are suspended.
• Creditors’ Lawsuits: Creditors can’t file lawsuits for 90 days after the financial distress announcement.
• Debt Rescheduling: The CBE may reschedule debts, except deposits and payment system-related dues.

Resolution Options

The CBE has the authority to initiate resolution procedures without shareholder, creditor, or debtor approval. Resolution options include:

• Dissolving the board of directors and appointing a delegate
• Fully or partially suspending operations
• Reducing share value or number
• Recapitalizing by issuing new shares
• Converting liabilities to shares
• Terminating or amending contracts
• Assigning assets and liabilities
• Merging with another bank or transferring title to shares

Cancellation of Resolution Decision

The CBE has the authority to cancel the resolution decision if the grounds no longer apply.

Conclusion

Overall, the framework aims to maintain financial stability while protecting depositors’ interests and minimizing losses for creditors.