Egypt’s banking sector is critical to the country’s economic development and financial stability. As one of the largest and most dynamic banking markets in the Middle East and North Africa (MENA) region, the Egyptian banking sector in recent years has undergone significant transformations, driven by evolving regulatory frameworks, technological advancements, and the need to address various challenges.
Banking Business means any activity that deals primarily and regularly with accepting deposits, obtaining financing and investing those funds in providing financing and credit facilities, contributing to corporate capital, and any other acts customarily known as banking business.
The Egyptian banking sector faces several challenges that require strategic and regulatory responses such as:
Non-Performing Loans (NPLs): The level of NPLs in the Egyptian banking sector has been a persistent concern, reflecting the impact of economic fluctuations and the need for improved risk management practices.
Technological Transformation: The banking sector is grappling with the need to modernize its infrastructure, adopt cutting-edge technologies, and offer innovative digital banking services to remain competitive and meet evolving customer expectations.
Cyber Security Threats: The increasing reliance on digital platforms and the rise of cybercrime have heightened the need for robust cyber security measures to protect banks and their customers from various threats, such as data breaches and fraud.
To address these challenges, the Central Bank of Egypt “CBE” and the Egyptian government have implemented various regulatory measures and initiatives, including:
Strengthening Supervision: The Central Bank of Egypt “CBE” has enhanced its supervisory framework, including the introduction of risk-based supervision and increased monitoring of banks’ compliance with regulations.
Fostering Technological Innovation: The CBE has introduced regulations to encourage banks to adopt innovative technologies, such as mobile payments, e-wallets, and block chain-based solutions, while also addressing the associated risks.
Enhancing Cyber Security: The Central Bank of Egypt “CBE” has issued guidelines and regulations to enhance the cyber security measures adopted by banks, including mandatory reporting of cyber incidents and the implementation of strong access controls and data protection measures.
Meanwhile, The Central Bank of Egypt (CBE) is the primary regulatory authority overseeing and governing the banking sector. The CBE’s mandate includes monetary policy formulation, banking supervision, and the promotion of financial inclusion and stability. Key regulations and laws governing the banking sector in Egypt include:
The Egyptian Central Bank and Banking System Law No. 194 of the year 2020: This law provides the legal framework for establishing, operating, and supervising banks and other financial institutions in Egypt. It outlines the licensing requirements, capital adequacy standards, and corporate governance practices that banks must adhere to.
Anti-Money Laundering Law No.80 of the year 2002 and its executive regulation No.951 of the year 2003: this law requires banks and other financial institutions to implement robust measures to prevent and detect money laundering and terrorist financing activities.
As mentioned in article No.64 of the Egyptian Central Bank Law No.194 of the year 2020, the CBE may grant initial approval to any facility wishing to be licensed to practice banking business when the following conditions are fulfilled:
- It must take the form of an Egyptian joint-stock company, or a branch of a foreign bank;
- The issued and fully paid-up capital of the bank shall not be less than five billion Egyptian pounds, and the capital allocated to the activity of foreign bank branches in the Arab Republic of Egypt shall not be less than one hundred and fifty million US dollars or its equivalent in free currencies;
- Clarity of the ownership structure to ensure identification of the ultimate beneficiary and ensuring the legitimacy of the source of funds;
- The license must not conflict with the general economic interest of the state;
- The license must not lead to a violation of the rules of competition and the prevention of monopolistic practices;
- The trade name taken by the bank must not be identical or similar in a way that raises confusion with the name of another bank or other establishment;
- An efficient financial and economic feasibility study that includes a statement of the purpose of its establishment, the nature of the activities and services that it will perform, and a market study that demonstrates its ability to mobilize and employ savings;
- Those concerned must have integrity, good reputation, and financial solvency; and
- The efficiency and clarity of internal control plans, risks, management, work systems, governance, strategy and policy that it intends to follow in managing its affairs.
Thus, interested parties shall submit to the Central Bank an application to obtain initial approval for a license to practice banking business, attaching to it the documents specified by a decision of the CBE’s Board of Directors, and proof of payment of the required application examination fee.
The application shall be presented to the Central Bank of Egypt Board of Directors to issue a decision regarding it within 90 days from the date of its submission, along with the required documents.
The necessary measures must be taken to establish the bank within (one year if the bank takes the form of a joint stock company and 6 months if the bank takes the form of a branch of a foreign bank) from the date of notifying the concerned parties of the CBE’s Board of Director’s decision to approve the incorporation initially. Otherwise, the approval shall be deemed null and void. The Board of Directors may extend this period for another similar period.
If the application is rejected, the applicant shall be notified within thirty days from the date of its issuance.
In conclusion, the banking sector in Egypt is subject to a complex web of laws, regulations, and policies aimed at ensuring its stability and integrity. While there are challenges facing the sector, the Central Bank of Egypt CBE continues to work towards creating a more robust regulatory framework that promotes financial inclusion, consumer protection, and economic growth.
