There is a strong tendency inside banks operating in the Egyptian market to keep their interest rates unchanged, despite the Central Bank of Egypt’s (CBE) decision to raise its basic interest rates by 2% on Sunday.
Some banks held intensive meetings on Monday to discuss the future of interest rates on deposits and loans, while other banks, such as the National Bank of Egypt (NBE) and Banque Misr, decided to wait for a few days.
The Asset-Liability Committee (ALCO) at NBE, which sets the interest rates at the bank, decided to convene Wednesday to determine the future interest rates of the bank, which has the largest share of deposits and loans in the Egyptian market.
According to banking officials, the government banks offer the market’s highest return of 20% on the saving certificates issued in November 2016 for an 18-month maturity period. They added that the banks will study this decision’s impact and whether they will apply a further increase in interest rates.
A banking expert said that private banks are anticipating the effect of raising the CBE’s interest rates on the return of treasury bills before they move to raise their interest rates on savings portfolios.
He added that the return on debt instruments is still seen as one of the most important determinants of interest rate movement in banks, as banks are still investing most of their liquidity in local currency in these instruments.
The government banks’ decisions whether to raise or lower interest rates will determine the private banks’ decisions on their interest rates, being the market’s “leaders” with the largest share, according to the source.
In the same context, Daily News Egypt conducted a quick survey showing that the movement of interest rates at the CBE would lead to a simultaneous increase in some savings certificates’ returns.
The interest rate of these certificates is linked to the basic return in the CBE, especially the deposit rate of 16.75%, as it moves up and down with it directly. Another hike was experienced in the return rates on some loans linked to the CBE’s lending rate, currently up to 17.75%. However, the volume of loans linked to the CBE’s return rate is very limited.
Banks tend to maintain interest rates unchanged despite CBE’s 2% hike
