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FRA?s Board issues four important decisions

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• Dr. Omran: Granting incentives and financial benefits to units and bodies operating in non-banking financial activities to empower women through access to financial services
• Dr. Omran: Extending the deadline granted to listed companies which did not implement the offering until the end of June 2021
• Dr. Omran: Issuing controls and standards for the ownership structure of the Futures Exchange Company and the Clearing Company
• Dr. Omran: At least 75% of the shares of the futures exchange and clearing company represents institutions with financial solvency and experience in Stock Exchanges
• Dr. Omran: Setting an additional reserve within the shareholders’ equity by the beginning of 2021 to support the financial positions of financing companies to face the effects of applying Accounting Standard No. (47) related to financial instruments

Before the end of 2020, FRA’s Board insists to consider four important files related to the non-banking financial activities sector and taking the necessary final decisions in this regard. One of the most important issues is granting incentives for companies and entities operating in non-banking financial activities. Such decisions aim at empowering women and enhancing their access to finance in accordance with FRA’s comprehensive strategy for the four years (2018-2022) and in line with Egypt’s Vision 2030 and its strategy for sustainable development  which seeks to build a fair society that guarantees gender equality.

Therefore, Dr. Mohamed Omran – FRA’s Chairman issues decision No. (205) of 2020 on granting non-banking financial companies and entities 50% reduction in the development fee or service charge, if their dealings with women reached 25% or more.

FRA’s Chairman indicates that the provisions of Article 14 of Law No. 10 of 2009 on Regulating Non-Banking Financial Markets and Instruments impose a development fee on companies subjected to the Authority’s control to develop the work of these companies.  The companies’ BOD shall set the development fees and it shall not exceed two per thousand of the company’s annual revenues. Accordingly, the value of development fees will be affected through providing more financial services for women that will cause an increase in the company’s annual revenues.

In order to promote gender equality, FRA’s Board issues decision No. (204) of 2020 on defining a number of controls that must be observed and adhered to as one of the requirements for issuing and maintaining a license to practice the activity, foremost of which is the prohibition of discrimination on the basis of sex (Male or female) among clients. The decision also stresses on implementing a policy that promotes gender equality, in addition to introducing and developing new non-bank financial products and services that suit the needs of various female clients. In addition, non-banking financial companies shall allocate a specialized unit or department or an official to study and examine the complaints of their clients and to define the multiple means through which client can submit a complaint.

The closing meeting of the Authority’s Board for the current year witnesses the approval of extending the deadline granted to listed companies which do not complete the procedures for implementing the offering for another six months ending on June 30, 2021, pursuant to the third paragraph of Article No. (1 bis) of listing and delisting rules.

Dr. Omran emphasized that the Board’s decision no. (210) of 2020 was issued to facilitate the listed companies which did not complete the procedures for implementing the offering. Such decision was issued to face the conditions and events that occurred on the global financial markets and reflected on the Egyptian capital market in Egypt. Moreover, the decision was issued in line with the regulator’s vision to enhance the resilience policy of non-banking financial activities in the face of the repercussions that we are facing in an unprecedented way and to support them with the measures that can be taken to reduce their effects.

Dr.  Omran asserts that listed companies mentioned before shall abide by a time plan that includes the measures that will be taken to implement the offering and these measures shall gain the Exchange’s approval.

FRA’s Board reviews the recommendation of the working group formed to study the controls and standards of the ownership structure of the Futures Exchange Company and the clearing company. It is worth mentioning that this working group includes representatives from the Central Bank, the Egyptian Stock Exchange, the MCDR , the Federation of Egyptian Banks, Insurance Federation of Egypt, a representative of the European Bank for Reconstruction and Development (EBRD). The group’s recommendation was discussed within the Capital Market Advisory Committee which supported the trend that the ownership structure of the Futures Exchange Company and its clearing company must include financial institutions with financial solvency and experience in Stock Exchanges, that is besides  adding some controls for the ownership structure.

Dr.  Omran said that FRA’s Board agreed that the ownership structure of the Futures Exchange Company and its clearing company shall include financial institutions with financial solvency and experience in Stock Exchange work with no less than 75% of its capital shares. On the other hand, the share of individuals shall not exceed 10% of the total share capital of the company.  Futures Exchange Company may offer 25% of its shares for public subscription at any time.
The four files listed on the Board’s agenda were also concluded by looking at the impact of applying the Egyptian Accounting Standard No. (47) which was consistent with International Financial Reporting Standard No. IFRS9.  The said standard shall be implemented as of January 1, 2021 in accordance with the Prime Minister’s decision. It is worth mentioning that the impact of applying the Egyptian Accounting Standard No. (47) will appear in company’s first financial position by the end of the first quarter of next year.

In addition, Dr. Omran issues regulatory decision no. (200) of 2020 on obliging mortgage finance, financial leasing, factoring, consumer finance, and financing medium, small , medium and micro enterprises to set  an additional reserve equivalent to (1%) of the total assets of the net profit for the year after withholding the tax for the fiscal year ending on 31/12/2020. This reserve shall be included within shareholders’ rights and shall not be used without the approval of the Authority.

FRA’s Chairman emphasizes that applying the Egyptian Accounting Standard No. (47) will result in an increase in the reserves of finance companies than those applied by the current standards in a procedure that enables any finance company to hedge and be prepared for any potential risks. Also, it enhances the durability and safety of its financial position in accordance with international best practices. Accordingly, due to the importance of the matter, companies’ Boards shall verify implementation, facilitate application among different departments within the same company and remove any obstacles that may face implementation.

This news item was originally published by the Finance Regulatory Authority (FRA EG). For more information, please see the Source Link.

Regulator Information

Abbreviation: FRA
Jurisdiction: Egypt

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