Tuesday, March 2, 2021

The Central Bank amends investment controls in small and medium enterprises investment funds

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The Central Bank approved new amendments to banks ’contributions to investment funds for small and medium enterprises, raising their relative risk weight to 20% instead of 0%, as well as including new funds for the 25% of the facilities required to be directed to small and medium enterprises, provided that they apply to new contributions and not Retroactively.
The Central Bank decided to add banks ’contributions to the capital of investment funds in funds of funds, funds and companies targeted to invest in the capital of small and medium-sized companies, including those emerging from them, within the prescribed 25% of the bank’s total credit facilities portfolio directed to micro and small companies. And medium according to the instructions issued in this regard.
And for that, he set conditions:
1- Obtaining the necessary license to practice the activity from the Financial Supervisory Authority.
2 The value of the bank’s share – from the amounts invested in the capital of small and medium-sized companies in the fund – or the bank’s total contribution to it, whichever is higher, is calculated from the date of the investment in the fund, according to the following:
During the first year: 70% of the total contribution
B. During the second year: 50% of the total contribution
C. During the third year: 30% of the total contribution
Dr.. Starting from the fourth year: the value of the bank’s share of the sums invested in the capital of small and medium-sized companies in the fund is calculated.
The Supervision and Supervision Sector is provided with a quarterly periodic report showing the value of the bank’s share of the sums invested in the capitals of SMEs in the fund compared to the bank’s contribution.
The Central Bank also decided to calculate a relative risk weight of 20% on the banks ’contributions to the capital of all investment funds, whether funds of funds or funds and target companies to invest in the capitals of small and medium-sized companies, including emerging ones, instead of 0% before that.
The Central Bank set conditions for benefiting from the reduced relative weight of banks ’investments in funds, which are:
1- Setting maximum limits for the value of banks ’investments in the capital of funds or companies, provided that the total value of the bank’s investments does not exceed 10% of the basic capital of the bank. In the event that this percentage increases, the increase must be deducted from the basic capital when calculating the capital adequacy standard.
2 – That the bank’s total share does not exceed 50% of the funds or companies ’capital, so that it does not fall within the banking group.
3 – That the bank invested in those funds or companies meets the capital adequacy standard at a rate exceeding the minimum standard, while adhering to all controls related to the internal assessment of capital adequacy.
4 – That the bank’s investments in these funds or companies be included in the leverage ratio.
5- That the necessary license to practice the activity be obtained from the Financial Supervisory Authority and subject to its supervision, given that these funds or companies are non-bank financial institutions.
6 – That the fund’s articles of association include the possibility of leaving the bank starting from the fourth year of the fund’s start date, especially in the event that no profits have been achieved for a period of 3 consecutive years.

The central article amends investment controls in small and medium enterprises’ investment funds, it was written in the Al-Borsa newspaper.

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The Central Bank amends investment controls in small and medium enterprises investment funds