EGYPT Law and Practice Contributed by: Mahmoud S. Bassiouny, Iman Nassar, Habiba Gamaleldin and Israa Mostafa, Matouk Bassiouny
8. Insolvency, Recovery and Resolution 8.1 Legal and Regulatory Framework The financial distress of any Egyptian bank is regulated by Chapter 12 of the New Banking Law, which excludes banks from the purview of the Restructuring, Reconciliation and Bankrupt - cy Law No 11 of 2018, which is the general leg - islation regulating the bankruptcy of companies in Egypt. The New Banking Law designates the CBE as the authority entrusted with regularis - ing the status of banks in financial distress. For that objective, the CBE is given wide powers and means to put into effect the provisions of the New Banking Law. Chapter 12 of the New Banking Law aims to achieve general objectives such as maintaining the stability of the banking system, protecting the interests of depositors, mitigating losses for creditors, and avoiding the utilisation of public funds in any resolution process. The guiding principles include ensuring the proportionality of the measures with the level of distress, absorb- ing any losses through equity rights as an initial resort, and giving all creditors of the same rank similar treatment. Banks in Financial Distress The CBE may issue a decision that a bank is in financial distress if: • the financial position of the bank concerned is poor, or the interests of depositors are at risk; • the bank fails to meet its liabilities in respect of depositors or other creditors; • the bank’s liabilities exceed the value of its assets;
• the value of the bank’s shareholders’ rights is decreased in comparison with the allocations that should be formed; • the bank fails to have access to funding resources or the financial markets; • the bank fails to adhere to the limit of the capital adequacy ratio or the liquidity ratio, or any other applicable supervisory ratios deter - mined by the CBE’s board of directors; • the value of the bank’s assets or profits sig - nificantly decreased in a way that threatens its ability to operate; • the bank is relying on exceptional and oner - ous financial resources to conduct its normal course of business; • the banking licence has been cancelled pur - suant to Article 173 of the New Banking Law; • the bank fails to undertake the procedures related to the early intervention prescribed under Article 147 of the New Banking Law; or • the branch of a foreign bank fails to meet its liabilities as well as those of the bank’s head office as per the unconditional security provided pursuant to Article 68 of the New Banking Law, and the competent authority in the state of its head office does not issue a decision to settle the bank’s status within the period determined by the board of directors of the CBE. In all cases, early intervention or any other pro - cedures are not deemed conditions precedent to initiate the resolution process for a distressed bank. The CBE is entitled to issue a reasoned decision that a bank is in financial distress and to initiate the resolution process. Such decision shall be valid for a period of one year as of the publica - tion date or the date upon which the relevant party is notified of such decision (as the case may be). The board of directors of the CBE is
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