The Central Bank of Egypt (CBE) withdrew EGP 1.24tn from 24 banks in open market operations last week, at an interest rate of 27.75%. This action follows the CBE’s recent decision to amend its bid acceptance policies.
CBE issued new instructions regarding the rules regulating the main operation for linking deposits (Main Operation) for open market operations through a fixed-rate auction every week. In these auctions, the size of the operation that CBE will conduct is announced. The tenders are accepted using the allocation method determined based on the ratio of the tender submitted by the bank to the total tenders submitted. The main operation price is applied to them.
CBE said that in light of its keenness to adopt the best international practices in terms of managing excess cash flows in the banking system and improving the effectiveness of monetary policy decisions, it has decided to change the method of accepting bids for the main operation to link deposits with it “Main Operation”. It would change it from the ‘allocation method’ to a process where all submitted bids are accepted as “Full Allotment”. The results of each linking operation are published on CBE’s website. CBE will continue to manage cash flows to ensure its suitability with its operational objective, which is to maintain the weighted average return rate in the interbank market around the main operation price.
