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CAIRO - 2 February 2022: The Board of Directors of the Financial Regulatory Authority (FRA) agreed to allow the establishment of companies to evaluate and classify the arrangement of securities, to set controls for their ownership, and to abolish the requirement that there be a contribution from international credit rating agencies in the capital of companies for assessing and rating the arrangement of securities operating in the Egyptian capital market.
Chairman of the FRA, Mohamed Omran, said that the amendment was issued to stimulate the presence of national credit rating companies in the non-banking financial sector and increase their numbers, which contributes to strengthening the sector's capabilities and creating a competitive environment within the national economy.
He stated that the amendment serves the interests of dealers from institutions, markets and customers and allows dealing with more than one alternative to creditworthy companies, in light of the increase in the number of bond issuances during the recent period, which amounted to 24 issues during the year 2021, bearing in mind that their numbers doubled following the issuance of legislation related to securitizing future financial rights, and sustainable development bonds, in implementation of Egypt’s 2030 vision related to sustainability.
Omran stressed that the Board of Directors is reassured about the amendment to delete the contribution of international credit rating agencies from the evaluation and rating companies expected to work in the local market, given the similarity of the nature of the credit rating company with the financial advisory company on securities, which in the latter did not require, upon its establishment, the availability of legal persons or international financial institutions - within the structure of its shareholders, because they are service companies that provide advice or evaluations to the companies being evaluated, and those companies adhere to the criteria of independence from the companies being evaluated.
The securities evaluation, classification and arrangement companies - known as the credit rating company - are an essential element in the financial markets to determine the ability of companies wishing to issue bonds or sukuk to pay the obligations owed by them on their due dates, as well as granting a degree of credit solvency to those companies and issuances subject to the credit rating. .
It is important for issuers of financial instruments in the market, investors and other users of credit ratings.