Egypt’s new Banking Law has officially come into effect, following its ratification by President Abdel Fattah Al-Sisi and subsequent publication in the Official Gazette.
The law’s provisions are to apply to all players in Egypt’s banking system, including the Central Bank of Egypt (CBE), exchange firms, and money transfer companies. Also covered by the law are credit reporting and rating companies, credit guarantee companies, payment system operators, and payment service providers.
Tamer El-Dakkak, the legal advisor to the CBE, said that the new banking law came into effect 24 hours following the date of its official publication.
El-Dakkak explained that under Article 4, banks are obliged to reconcile their positions according to the law’s provisions within a period 12 months from the date of its implementation.
The CBE’s board may extend this period to no more than two years, making this transitional period range from one to a maximum of three years.
The new law aims to achieve several objectives, keeping pace with the best international practices, norms, and the legal systems of counterpart supervisory authorities around the world.
It will ensure the maintenance of monetary and banking stability and avoid financial crises. It also aims to raise the level of the Egyptian banking sector’s performance, and develop and support its competitive capabilities to qualify it for global competition. At the same time, the new law is set to help achieve the Egyptian government’s aspirations towards development and economic progress.
The CBE’s governance and independence will be strengthened under the new regulations, to ensure that it achieves its objectives relating to constitutional controls of independent bodies and supervisory authorities.
Regulations are also being imposed on aspects of coordination and cooperation between the CBE, the government and the supervisory authorities in the financial sector.
At the same time, it also looks to ensure the principles of transparency in governance, disclosure, equality, and prevention of conflict of interest. Fair competition controls, the prevention of monopolisation, and protecting customers’ rights in the banking system are also covered by the law.
Mohamed El-Etreby, Chairperson of both Banque Misr and the Federation of Egyptian Banks (FEB), said that President Al-Sisi’s ratification of the new banking law is an important and positive step for Egypt’s banking sector.
He also said that the law proves the professionalism of those in charge of the CBE.
At the same time, it grants the CBE full independence to make the necessary decisions, in addition to adding new regulations for financial technology (fintech), governance, and other important issues that enhance the banking system’s abilities.
El-Etreby added that banks will be granted a grace period, following the law’s ratification, so they can comply with the new regulations.
Suez Canal Bank (SCB) Chairperson Hussein Refaey said that the new banking law will contribute to developing and modernising the Egyptian banking system. It is set to strengthening the sector’s capabilities and principles of transparency, disclosure and equality.
It will also further reinforce financial inclusion and boost Egypt’s banking activities, putting a greater reliance on financial technology. This will ensure that the law contributes to boosting rates of economic growth.
He added that the issuance of the new law, which is a compilation of previous laws related to the sector, took place due to the growing sense of the importance of the country’s banking sector and foreign exchange. It will give the CBE greater independence and responsibilities in supervising the banking sector and foreign exchange.
He pointed out that the CBE’s law came to keep pace with international experiences. It mainly aims to maintain the stability of the financial system of the Egyptian state.
Alaa Farouk, Chairperson of the Agricultural Bank of Egypt (ABE), said that the new law’s approval is a milestone in Egypt’s banking system and the achievements of the CBE led by Tarek Amer.
Farouk noted that it also reflects Amer’s comprehensive vision for developing and modernising the country’s banking sector. This effort aims to improve the banking sector’s performance following the best international practices and legal systems of supervisory authorities.
The law includes very important topics to support the ABE’s work, especially in the field of financial inclusion, Farouk said. He added that his bank is confident the new law will enhance its ability to integrate small and micro-business owners and other groups into the formal economy, which would strengthen the state’s trend to develop this important sector.
Radwa El-Swaify, head of the research department at Pharos Investment Bank, said the banking law will provide banks with a three-year period to adjust their capital positions and meet the new requirements.
She added that some banks might resort to increasing their capital, while others will delay profit distribution to increase their capital in the market.
El-Swaify noted that mergers and acquisitions are likely to occur among banks that cannot reconcile their positions.
A large number of banks need to raise their capital during the coming period, most notably the Industrial Development Bank (IDB), Misr Iran Development Bank (MIDBank), the Abu Dhabi Commercial Bank (ADCB), and the Suez Canal Bank (SCB), to comply with the new law.
