FRA sets new solvency standards for consumer finance companies

Egypt’s Financial Regulatory Authority has set new solvency standards for consumer finance companies in a  step to reign in concentration risk and strengthen financial stability.

Under the new rules companies will only be allowed to lend up to 10 percent of their capital base to a single borrower to prevent them from becoming overexposed to a small number of clients. Companies will also be allowed to take loans worth up to 9x their equity value to support their activities.

FRA also notes that stricter capital requirements will be introduced to shore up balance sheets but didn’t disclose the specifics.

Companies will have to comply with the new rules by the end of FY2020-2021 and submit quarterly compliance reports to the FRA.