CAIRO: Egypt s new financial regulation body aims to help improve standards of disclosure and broaden access to financial instruments used in the Arab world s most populous country, the authority s head said on Monday.
Egypt announced in June it was creating the Egyptian Financial Services Authority to oversee capital markets and non-bank financial services. The existing Capital Market Authority falls under the new broader body.
Analysts said setting up the new authority, which began work on July 1, would provide the framework to develop financial instruments like mortgages and more credit options for small and medium-sized firms in Egypt where banks are cautious lenders.
It has become increasingly important around the world to unify the regulators so the regulators are capable of seeing and monitoring the whole spectrum of activities of financial institutions, the authority s head Ziad Bahaa El-Din told a news conference, adding Egypt opted to retain the central bank s role supervising banks and have the new body oversee non-banks.
What we need … is not to add on new crimes and new penalties, but rather to improve the standards of disclosure of information, he said.
Egypt was insulated from the worst of the global credit crisis due in part to conservative policies of its banks, which shied away from high-risk investments and leverage of their deposits.
But bankers say there is a large market for mortgages and other lending opportunities that can be safely tapped and complain of challenges in proving home ownership and other issues that have slowed development in these areas.
We have one of the lowest insurance penetration rates you will come across, Bahaa El Din said, adding that the level of mortgage lending was also very low by international standards.
Egyptian banks are loath to lend to any but the most creditworthy firms, analysts say, with an average loan-to-deposit ratio of 50-55 percent.
This compares to 85 percent in the Gulf. Ratios in the United States and Europe can top 100 percent.
The new regulatory body could help develop new products on the stock exchange and regulate the over-the-counter (OTC) market, both long promised initiatives, analysts say. Short-selling, derivatives and new indices have all been mooted.
But Bahaa El-Din said his focus on the OTC market would be on encouraging more listings rather than clamping down.
I don t think clamping down on the market should be a target in itself.
Obviously the more listed companies there are the better for everybody – for the market, for the investors, for the companies themselves, for the regulator, he said. The new regulator will be able to initiate criminal cases by passing cases to the prosecutor, Bahaa El-Din said, adding that firms could have licenses withdrawn and fines imposed as penalties for violations of financial regulations.
Our laws on something like insider trading are in fact much tougher than in most other countries, he said. But it s not the law that counts alone in these matters. It is the practice, both on behalf of the regulator but more importantly on behalf of the market and the kind of awareness that exists.
