CBE Issues New Circular Regulating Digital Banks in Egypt
The Central Bank of Egypt (CBE) has introduced a new circular, effective July 12th, 2023, outlining regulatory requirements for digital banks operating within the country. This circular aims to provide clarity on licensing and registration procedures, as well as rules governing revocation of licenses and suspension of operations.
Definition of Digital Banks
The circular defines digital banks as any bank or branch of a foreign bank that provides banking services through digital channels or platforms using modern technological techniques. These institutions are required to operate in accordance with the Banking Law No. 194 of 2020 and its regulations, except for provisions related to granting credit facilities to large corporations.
Major Licensing Requirements
To obtain a license, digital banks must meet several key requirements:
- A financial institution must hold at least 30% of the bank’s capital
- The financial institution must have a previous history in similar businesses and activities (with potential exemptions based on CBE approval)
- The ownership structure must be clearly presented to identify ultimate beneficial owners and ensure the legality of funds
Preliminary Approval
Digital banks or branches of foreign digital banks must submit an application to the CBE, accompanied by a fee of EGP 1 million (for Egyptian joint-stock companies) or USD 50,000 (for foreign bank branches). The application will be decided upon within 90 days, with potential extensions for branches of foreign banks.
Regulatory and Supervisory Rules
Digital banks must abide by all rules and regulations issued by the CBE, including:
- A maximum deposit limit of EGP 200,000 for individual clients
- Prohibition on granting credit facilities to large corporations (with exceptions for medium enterprises or with CBE approval)
- Compliance with Anti-Money Laundering and Terrorism Financing Unit instructions
The newly issued circular provides a comprehensive framework for digital banks operating in Egypt, emphasizing the importance of adhering to regulatory requirements to ensure stability and security in the financial sector.