Credit Risk

Credit risk is defined as the losses arising if a counterparty (obligor/bank) to the Central Bank of Egypt (CBE) fails to meet a financial obligation for full or partial value on due date. The Credit Risk Department works to mitigate such risk, within the framework of the approved CBE Credit Policy that sets the standards, principles and guidelines to manage these risks and minimize them to the lowest point. It also defines the responsibilities and roles of all parties involved in this framework.

The Credit Risk Department conducts sovereign risk analysis, along with comprehensive quantitative and qualitative analysis for the CBE counterparties, to establish limits. These limits cover money market placements and FX deals, managed by the CBE Reserve Management Department; trade finance transactions and Nostro accounts, managed by the CBE Banking Operations Sector. The Credit Risk Department also follows up and studies the solvency of non-bank international securities traders that the CBE deals with.

To establish credit limits, the Credit Risk Department conducts the appropriate due diligence for countries and financial institutions; including country risk (political, economic, fiscal and banking sectors) and bank quantitative and qualitative analysis, along with the CBE Obligor Risk Rating (ORR). CBE counterparties are assigned an ORR according to their lowest rating grade given by the 3 big international rating agencies (namely: Fitch, Standard & Poor's, and Moody's). Further, the Credit Risk Department continuously monitors and follows-up international and domestic markets to identify all developments that may pose potential risk to the CBE and initiate the appropriate action.​