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Egyptian Banking Compliance Rules: A Guide to Understanding the Regulatory Framework

The Central Bank of Egypt (CBE) has been tasked with regulating the country’s banking sector, ensuring financial stability and consumer protection. But what are the key policies that govern the industry? And how do they affect banks operating in Egypt?

According to Law No. 194 of 2020, the CBE is responsible for formulating the banking and monetary policies of the Arab Republic of Egypt. The law outlines several underlying principles, including:

  • Stability of the banking and monetary sector
  • Transparency in reporting
  • Adequate risk management policies
  • Free competition
  • Corporate governance
  • Protection of depositors’ rights

Regulated Institutions

A bank is defined under the Banking Law as a company or branch of a foreign bank licensed to undertake “banking activities” in accordance with the law. This includes:

  • Receiving deposits or obtaining funds and investing those monies to grant financing or credit facilities
  • Participating in the capital of companies
  • Any other activity that involves banking

Digital banks are now recognized under the Banking Law, and fintech companies operating in consumer finance are considered non-banking financial activities, falling under the jurisdiction of the Financial Regulatory Authority (FRA).

Size and Complexity

Any bank subject to the Banking Law is required to comply with the same rules, regardless of its size or complexity. However:

  • Specialized and digital banks may be exempt from minimum capitalization requirements, according to the CBE’s board of directors.

Primary and Secondary Legislation

The primary source of legislation governing the banking industry in Egypt is Law No. 194 of 2020. The law covers a range of subjects, including:

  • Financial stability
  • Data privacy and security
  • Consolidation of cashless payments
  • Dispute resolution mechanisms
  • Capitalization requirements

The CBE’s directives are explanatory in nature and provide further details on the implementation of the Banking Law.

Regulatory Challenges

Despite the simplification and clarification of the regime for taking security under the Banking Law, there are still some time and execution constraints. Additionally:

  • Egyptian banks may face limited business opportunities due to the CBE’s single obligor limits.

Consumer Protection

Banks operating in Egypt are not subject to the Consumer Protection Law No. 181 of 2018, but the CBE has been empowered to protect clients’ rights. The bank has established a unit dedicated to this purpose and issues regulations directly dealing with clients’ rights.

Future Changes

While there may be some minor changes to the regulatory framework in the coming years, no significant legal or regulatory overhaul is anticipated soon. However:

  • The CBE is expected to issue circulars and board of directors resolutions implementing the Banking Law and addressing pending issues such as cryptocurrency dealings.