The Egypt Financial Regulatory Authority (FRA) has issued a new Basel III-aligned solvency standards framework for companies and entities operating in non-banking financial activities, updating capital, liquidity and risk requirements. Board Decision No. 137 of 2025 mandates a trial application from 1 January 2026 and provides that the new standards will replace existing FRA solvency requirements from 1 January 2027. The framework introduces solvency standards for microfinance and amends requirements for mortgage finance, financial leasing, factoring, consumer finance, and small and medium enterprise finance. Capital adequacy calculations are expanded by adding a risk buffer and a countercyclical buffer to the capital base, with market risk also taken into account, while operational risk requirements are revised to cover all income statement items rather than being limited to a percentage of gross and operating profits. Liquidity requirements are adjusted through changes to short-term liquidity ratios and the introduction of a long-term liquidity indicator to support short- and long-term obligations and assets-liabilities matching, alongside new treatments for provisions on rescheduled balances and settlement portfolios (outstanding debt net of waivers) and updated individual and sector concentration risk rules that allow additional capital requirements where prescribed concentration ratios are exceeded. The decision also changes debt write-off rules by allowing write-offs subject to specified governance, provisioning and auditor-confirmation conditions, with any subsequent recoveries recognised as income in the year of collection, effective from publication in the Egyptian Gazette. Covered firms must take steps to align with the standards, including preparing work and staffing plans and readying electronic systems, and notify the FRA once actions are taken. Detailed quarterly reports on the pilot application results are required starting 1 January 2026.
Egypt Financial Regulatory Authority 2025-08-14
Egypt Financial Regulatory Authority issues Basel III-aligned solvency standards for non-bank financial firms with pilot from 1 January 2026 ahead of full adoption in 2027
The Egypt Financial Regulatory Authority has issued a Basel III-aligned solvency standards framework for non-banking financial activities, effective 1 January 2027, with a trial starting 1 January 2026. It updates capital, liquidity, and risk requirements, introducing new solvency standards for microfinance and amending requirements for other sectors. Key changes include expanded capital adequacy calculations, revised operational risk requirements, adjusted liquidity ratios, and updated debt write-off rules.