Currency and Banking
Law No. 38 of 1994 enables the free transfer of foreign currency into or out of Egypt and from one person to another within the country. The only foreign exchange restriction provides that the proceeds from sale of real estate in Egypt that is owned by foreigners residing outside of Egypt may not be transferred abroad for a five year period following the sale. The Egyptian pound remains non-convertible and may not be taken outside the country.
The Central Bank of Egypt sets policy for almost all of the country's bank with the exception of three: Misr African International Bank, the Arab International Bank and the Egypt Export Development Bank.
Banks can set their own interest and exchange rates within guidelines set by CBE, such as T-Bill auctions and discount rates. Also, a large increase of foreign and domestic banks operating in Egypt has caused the Central Bank of Egypt (CBE) to set restrictive guidelines for new comers.
From 1957-1974, only fully owned Egyptian banks were permitted to operate. The Investment Law 43 of 1974 allowed foreigners to obtain a less than 50 percent stake in a joint-venture commercial and investment bank. Further laws continued to open the banking system, including permitting foreign bank branches to operate in Egyptian currency. Finally, on June 16, 1995, the government approved majority foreign ownership joint-venture banks.
In 1999, there are numerous American banks operating in Egypt including Citibank, American Express Bank, Bankers Trust, Bank of New York, Chase Manhattan and one Egyptian-American Bank.
At the end of June 1998, total bank assets were $73 billion, deposit base $54 billion and loan portfolio of $48 billion.
Egyptian banks are generally considered overly conservative. They often demand a counter guarantee equal to the amount borrowed as a condition for granting a loan. Short-term lending makes up about 80 percent of the major banks' portfolios.
There are over 100 banks in Egypt including thirty-eight commercial banks that are controlled by four government-owned banks (Banque Misr, National Bank of Egypt, Bank of Alexandria, and Banque du Cairo) and numerous joint ventures and specialized banks. These four government-owned banks hold two-thirds of the banking community's assets.
Presently, some major international investment banking institutions are entering the Egyptian market, including HSBC Investment Banking, ING Barings, Credit Suisse and Morgan Stanley.
The Egyptian Government has revised many of the banking laws and practices. Egypt's banks have benefited from the government's reforms of the exchange rate and interest rate systems, and many have made substantial gains by investing in government bills and bonds. Nonetheless, banks still suffer from low capitalization and heavy debt burden from the former socialist period.
© 2000 Mena Report (www.menareport.com)