Banks operating in the Egyptian market have been working on increasing their capital to comply with the country’s new banking law in In the past few days.
Banking Law No 194 of 2020 stipulates that the minimum capital for banks operating in the Egyptian market should stand at EGP 5bn, instead of the EGP 500m in the previous law. The capital of foreign bank branches should stand at $150m, instead of $50m.
The increase aims to increase the rigidity and efficiency of the capital base at banks, in order to help them face potential risks and enhance their ability to compete with other banks regionally and globally.
The new Banking Law took effect on the second day of its publication in the Official Gazette on 15 September 2020.
According to Article 4 of the law, banks are obliged to adjust their positions according to the provisions of the law, within one year from the date of its implementation.
The Central Bank of Egypt (CBE) may extend this period for two years at most, ensuring the transitional period ranges from one to three years.
After issuing the law, the CBE has obliged banks operating in the local market not to make cash distributions from the year’s profits or retained earnings that are distributable to shareholders.
In a letter to banks posted on its website, the CBE explained that this measure aims to support the capital base of banks in facing the potential risks due to the continued coronavirus (COVID-19) pandemic.
It pointed out that the distribution will be limited to employees, and that the bonuses of the Board of Directors will be paid for fiscal year (FY) 2019/20 only.
