الهيئة العامة للرقابة المالية

• Implementing measures to promote competition and prevent market dominance in the non-bank financial sector
• The Authority grants approval for ownership or acquisition without requiring Board of Directors approval, streamlining the process.
• Board of Directors approval is only required if a transaction results in a party controlling 10% of the total market size.
• A workshop will familiarize FRA’s staff with identifying potential economic concentrations in the non-bank financial sector.
• Mohamed Farid states that the Authority prioritizes protecting competition in the non-bank financial sector to attract investments and stabilize markets.

FRA Board of Directors chaired by Dr. Mohammed Farid, issued Decree No. 178 of 2024 regarding the controls for approving ownership, mergers or acquisition for non-bank financial institutions. This decree aims to improve the business environment for non-bank financial activities, streamline processes, enhance competition and prevent market dominance.

The said decree established regulations for ownership and acquisition of non-bank financial companies, excluding insurance and reinsurance companies. The requirement for Board of Directors approval is only triggered if the transaction results in ownership or acquisition of more than 10% of the relevant market. Otherwise, the Authority can approve ownership or acquisition without Board approval, streamlining the process.

The new decree limits the Authority’s Board of Directors’ approval for ownership and acquisition of insurance and reinsurance companies to cases where prior approval is required under Law 155 of 2024. This applies when a natural or legal person or their associated parties acquire insurance or reinsurance companies or when ownership percentage exceed the legal limits  stated in the decree , namely 10%  or quarter or one-third or half or two-thirds or three-quarters or 90% of the issued capital or voting rights of these companies.

These amendments aim to streamline the procedures for completing acquisitions and provide a supportive investment environment for businesses to grow and attract investment. By simplifying the process, the Authority hopes to encourage more investment and development in the sector.

The decree requires prior approval from FRA’s Board of Directors for any practices or procedures that could lead to a person or group controlling 10% or more of the market for a non-bank financial service.  Also, the decree defines “control” as an increase in market share exceeding 10% of non-bank financial market.

Moreover, the decree requires licensed companies engaged in non-banking financial activities to obtain prior approval from the Authority before merging with another company in the same or a related sector if the merger could lead to market control. The Authority must publish a statement and summary of the merger or acquisition request in a widely circulated newspaper and on its website, as well as on the Egyptian Stock Exchange screen if the relevant company is listed on the Stock Exchange. This is to enable third parties to submit their comments on the request to the Authority within 15 days from the date of publication.

The decree stipulates that its provisions apply to the requests of NBFIs wishing to acquire or purchase shares, ratify the minutes of boards of directors or general assemblies that include changing the structure of ownership or boards of directors, issue shares to a company as a result of a merger or other decisions related to capital adjustment. Also, it requires companies to obtain prior approval from the Authority for incorporation, licensing, prospectuses, information memoranda, trading disclosure reports, or any other actions that may lead to control or acquisition.

The decree stipulates that the Authority or its Board of Directors must decide on acquisition, control, or merger requests within 45 days of receiving the application. Approval is valid for 6 months, after which it expires unless extended.

The decision to approve or reject a request for acquisition, merger, or control will depend on the Authority’s assessment of the operation’s impact on the market, service provision and competition.   Additionally, if the company’s shares are listed on the Egyptian Stock Exchange, the decision will also consider the impact on the continued listing of these shares.

For his part, Dr. Mohamed Farid, FRA’s Chairman confirms that the Authority’s Board of Directors has issued decrees No. 177 and 178 to replace Board of Directors’ decree No. 53 of 2018 regarding the controls for granting and maintaining licenses and ownership rules. This comes in light of the issuance of number of new laws and amendments after the issuance of the Board of Directors’ decree No. 53 of 2018, such as the Unified Insurance Law, the Competition Protection and Monopoly Prevention Law, and the Microfinance Law. He adds that the issuance of the new decrees came to accommodate the legislative amendments that have taken place during the previous period.

Dr. Farid asserts that FRA’s strategy aims to develop non-banking financial markets and activities and protect the rights of all participants through a number of measures, including the development of regulatory and legislative controls to enhance the role of the non-banking financial system in the national economy.

At the same time, FRA has organized an introductory workshop for its staff whose work related to mergers and acquisitions that may lead to economic concentrations in the future. Dr. Khaled Hamdy Attia, former Executive Director of the Egyptian Competition Authority, presented the workshop. It included an overview of Law on Protecting Competition and Preventing Monopolistic Practices and the most important laws and agencies that regulate economic concentrations, besides mechanisms for monitoring economic concentrations and an explanation of economic concentrations subjected to FRA’s supervision and its relationship with the Egyptian Competition Authority (ECA) and other practical cases.