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Egypt’s Banking Sector: Key Regulatory Requirements
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Cairo - In a move to strengthen the banking sector and ensure stability, Egypt has introduced new regulatory requirements for banks operating in the country. The Central Bank of Egypt (CBE) is now responsible for overseeing the sector, with a focus on transparency, risk management, and consumer protection.
Defining Characteristics of a Bank
According to the Banking Law, a bank is defined as a company or branch of a foreign bank licensed to undertake banking activities. This includes:
- Receiving deposits
- Investing funds
- Granting financing or credit facilities
- Participating in the capital of companies
Regulated Institutions
The CBE regulates all banks operating in Egypt, including branches of foreign banks. The regulator has introduced new requirements for digital banks, which are now recognized under the Banking Law.
Digital Banks
- Recognized as a separate category under the Banking Law
- Subject to specific requirements and regulations
Minimum Capital Requirements
Banks must meet minimum capital requirements:
- A minimum issued and paid-in full capital of E£5 billion (approximately $330 million)
- Foreign banks operating in Egypt must have a minimum capital of US$150 million or its equivalent in free-floating currencies
Primary and Secondary Legislation
The Banking Law is the primary legislation governing the banking sector, with a focus on:
- Financial and monetary stability
- Data privacy and security
- Consumer protection
Directives from the CBE
The CBE has issued directives to provide further guidance on practical aspects of the sector.
Regulatory Authorities
The CBE is responsible for overseeing banks operating in Egypt, while the FRA regulates non-banking financial activities.
Digital Banks and Fintech Companies
- Subject to specific requirements and regulations
- Regulated by the CBE
Deposit Insurance
Deposits are not directly guaranteed by the government. A Guarantee of Deposits Fund has been established to protect clients’ rights.
Unconditional Guarantee from Headquarters
Banks must submit an unconditional guarantee from their headquarters covering all deposits and obligations of their branches in Egypt.
Transactions Between Affiliates
Banks are prohibited from entering into partnerships or companies limited by shares as a partner, except in specific cases.
Non-Banking Activities
If an affiliate provides non-banking activities, it would be subject to the supervision of the FRA.
Regulatory Challenges
Despite the new requirements, Egyptian banks continue to face regulatory challenges:
- Time and execution constraints for taking security
Plans to Simplify the Regime
The regulator has introduced plans to simplify and clarify the regime for taking security, but further reforms are needed to address these issues.
Consumer Protection
Banks are not subject to the Consumer Protection Law, but the CBE is competent to protect clients’ rights and has established a unit within the bank to handle complaints.
Regulations Dealing with Clients’ Rights and Competition
The regulator also issues regulations dealing with clients’ rights and competition.
Future Changes
The Banking Law was recently introduced in September 2020, and we do not anticipate significant changes in the near future. However, further circulars and resolutions from the CBE are expected to implement the new law and address pending issues such as cryptocurrency dealing.