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Limited impacts for recent CBE lending controls: Beltone Reducing maximum loan per customer and bank contributions in capital market funds for better risk management and to diversify its applications
Beltone Financial said the recent lending controls issued by the Central Bank of Egypt (CBE) will have limited effects on banks. CBE cut down the maximum bank-lending rate per customer and the banks' contributions in funds of the capital market. Beltone's research department issued a recent report stating that this procedures aims for better risk management at banks, diversify its applications, and for new means of growth to offer better support to the state's budget deficit before imposing the value added tax, in addition to institutionalizing small and medium enterprises (SMEs). It said that reducing personal loans rate to 35% of the customer's monthly income and 40% for personal housing loans will improve assets quality at banks and prevent new non-performing debts. "Through ongoing discussions with management of some banks, we believe that major banks such as CIB and Credit Agricole Egypt have already adhered to these controls in most of their operations, with only a few exceptions such as the high-income tranche," Beltone's report read. Some public sector and small banks exceed this rate, it said. Reducing the maximum syndication per client from 20% to 15% of the capital base of the bank and the reduction of the maximum syndication for client and parties associated with it from 25% to 20% of the capital base of the bank will encourage banks to give more loans and cut down risks resulting from lending a small number of major companies, according to Beltone.
