The Central Bank of Egypt (CBE) has warned banks operating in the country about imposing additional commissions on the sale of foreign currencies, according to an official document obtained by Zawya.
In the document, CBE governor Hisham Ramez said the procedure "is part of the central bank's on-going efforts to regulate the foreign exchange market during this difficult time in Egypt". He said CBE is monitoring the market to prevent any violations and working to raise the efficiency of the foreign exchange market and monitoring it to prevent any transgressions.
"Egyptian banks used to impose a commission [of] between 1% and 1.5% on foreign currency sales and CBE gave them the freedom to determine their rates from the 1990s until now," a banking industry source told Zawya.
According to article 135 of the banking law, CBE's board of directors can take the following actions against offending banks: issue a warning, reduce or suspend credit facilities granted to the bank, prevent the bank from conducting certain transactions or limit the size of the credit offered. The central bank can also obligate the bank to deposit non-interest bearing balances at CBE.
BUILDING INVESTOR CONFIDENCE
Since becoming central bank governor, Ramez has reactivated a repatriation scheme that guarantees foreign investors in Egypt's stock and government bond markets access to dollars. The scheme is aimed at restoring confidence in the country's economy.
"Covering the backlog owed to foreign investors on the stock market in two weeks was a good sign for the Egyptian economy, especially since some believed that after covering 50% of the backlog it would take months to cover the other half; but it was done in less than two weeks," said Ramez.
Financial market expert Ahmed Younis said the mechanism to provide USD for foreign investors should attract foreign investment and help Egypt as it implements a roadmap for political transition.
According to the Egyptian Stock Exchange, foreign non-Arab transactions reached EGP 301 million (USD 43.1 million) since the beginning of 2014, while Arab transactions stood at EGP 1.6 billion, excluding deals. The stock exchange's annual report showed net foreign non-Arab sales in 2013 reached EGP 2 billion compared to EGP 3.6 billion in 2012.
© Zawya 2014
