The Central Bank of Egypt (CBE) launched an initiative to guarantee import operations by covering the risks associated with issuing documentary credits through banks, which will be issued starting from 22 February.
In a letter to the banks, the CBE said that the initiative targets customers who have a history of importing through collection documents only and from the same bank.
The CBE explained that the credit risk guarantee company will guarantee the bank’s portfolio under this initiative by 100% for the part not covered by these credits, and the banks will be exempted from the guarantee commission for a period of 6 months from the date of activating the initiative, provided that the credit risk guarantee company provides the banks with the determinants and framework of this initiative.
It also stressed the importance of banks’ commitment to provide the Credit Risk Guarantee Company with the necessary data on this portfolio on a weekly basis in accordance with the requirements that will be shared by the company, stressing the need to take the necessary steps in this regard and open all required documentary credits from all customers upon their request.
Furthermore, the CBE indicated that this initiative comes as a continuation of the letter issued on 13 February regarding the governance of the import process, the cessation of dealing with collection documents in the implementation of all import operations, and working with documentary credits only.
Last week, the CBE announced that it would not be dealing with collection documents in the implementation of all import operations and working with documentary credits only, with the exception of the branches of foreign companies and their subsidiaries, and allowing the acceptance of collection documents received for goods that had already been shipped before the implementation of the decision.
The Federation of Egyptian Banks said that the CBE approved exceptions and facilities for implementing this decision by excluding shipments received by express mail, sums amounting up to $5,000 or its equivalent in foreign currencies, drugs, serums, chemicals, tea, meat, poultry, fish, wheat, oil, powdered milk, baby milk, lentils, butter, and corn from the decision.
The CBE also instructed banks to reduce all commissions for documentary credits to the value of commissions for collection documents, and also directed banks to increase the existing credit limits for customers opening new orders for new clients in proportion to the import volume of each client and opening all required documentary credits from all clients upon their request.
Additionally, the federation pointed out that the CBE’s decision is a banking regulatory procedure issued in line with the recent decisions of the Cabinet regarding the governance of import procedures and to complement the system of pre-registration of shipments.
The aim of this is to raise the level of goods received from abroad to protect the health and money of citizens as well as the governance of the foreign trade system, the protection of local industries, and preservation of sovereign state resources.
It explained that starting from the date of the issuance of this decision, banks will deal with the matter in accordance with the determinants approved by the CBE in the implementation of import operations to work with documentary credits, pointing out that with regard to goods previously shipped before the issuance of this decision, it is allowed to deal with them through collection documents based on the customer’s request.
Also, both branches of foreign companies and subsidiaries of foreign companies were excluded from that decision within the scope of import operations from the parent company and its groups only.
