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Egypt’s Banking System Seeks Stability Amid Financial Turbulence

CAIRO - The Central Bank of Egypt (CBE) has implemented a series of measures to ensure the stability of the country’s banking system, which is facing increased pressure due to market fluctuations.

Risk Management and Regulation

According to the CBE’s criteria, 25% of banks are categorized as “systemically important” and require stricter regulations. These banks are subject to regular reviews by the CBE to assess their risk levels and compliance with capital conservation buffer requirements and liquidity coverage ratios.

  • The CBE has also issued circulars aimed at mitigating concentration risks and interest rate risks related to trading books of banks.
  • All Egyptian banks, except for branches of foreign banks, must comply with these regulations to manage their credit, market, and operational risks.

Insolvency, Recovery, and Resolution

The CBE plays a crucial role in regulating the insolvency of Egyptian banks, which is governed by Chapter 12 of the New Banking Law. This law excludes banks from the purview of the Restructuring, Reconciliation, and Bankruptcy Law No. 11 of 2018.

  • The criteria for identifying financial distress include:
    • Poor financial performance
    • Risk to depositors’ interests
    • Failure to meet liabilities
    • Decreased shareholder value
    • Inability to access funding resources or adhere to capital adequacy and liquidity ratios

If a bank is deemed financially distressed, the CBE may take various measures, including:

  • Transferring competencies related to general assemblies, the board of directors, and executive administration
  • Suspending profit distributions and payments to senior executives
  • Rescheduling debts owed by the bank
  • Suspending lawsuits filed against the bank
  • Dissolving the bank’s board of directors and appointing a delegate to manage its affairs

Conclusion

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In light of the current market fluctuations, the CBE has taken decisive measures to stabilize Egypt’s banking system. By revisiting the criteria for identifying systemically important banks and implementing regulations to mitigate risks, the CBE aims to ensure the long-term stability of the sector.

As the Egyptian economy continues to evolve, it is essential that the CBE remains vigilant in monitoring the financial health of banks and taking swift action to address any signs of distress. By doing so, the CBE can maintain public trust and confidence in the banking system, ultimately contributing to Egypt’s economic growth and development.