12 - 18 September 2002
Issue No. 603
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Published in Cairo by AL-AHRAM established in 1875 Recommend this page

The winds of change

A new generation of bankers has taken the helm at the country's most strategic banking institutions. They come with no dearth of plans to reform and modernise Egypt's flailing banking sector. Yasser Sobhi writes

More than a dozen banks have changed their top management during the last two years, most of them in the past few months. The change has included private and foreign banks, but most importantly, public banks as well.

A new generation of bankers, including the governor of the Central Bank of Egypt (CBE) Mahmoud Abul-Oyoun, and his deputy Mahmoud Abdel-Aziz, in charge for less than a year, have emerged. They will have to face a number of challenges -- cleaning portfolios, modernisation and increasing competition in the sector.

"I'm optimistic. The trend is very positive. It's a sign that the authorities are determined to clean up the banking sector," said MP Faika El-Rifa'i, the CBE's former deputy governor. "The new leaders have a good reputation, are well- educated and have remarkable experience. The transfer of top management between banks is also healthy. Those changes will result in a significant improvement in the banking sector."

Last month, Prime Minister Atef Ebeid took two consecutive decisions concerning the top management of two public banks: the Bank of Alexandria and Banque du Caire. Mahmoud Abdel-Latif, only recently appointed vice president of Bank of Alexandria, was made president, replacing the veteran Mahmoud Abdel-Salam Omar, the former head of the Egyptian Banks Federation.

Meanwhile, two women, Fatima Lotfi and Mona Yassin, have been assigned top banking posts. Lotfi, who was managing director of Watany Bank of Egypt, has become the new vice president for the Bank of Alexandria. Yassin, previously the director-general of Citibank in Egypt, was named vice president of Banque du Caire and managing director of Cairo Far East Bank.

Two years ago, Ahmed El-Barad'i was appointed president of Banque du Caire and then of Misr America International Bank.

The two heads of the two public banks have something in common: they both did stints at Citibank.

"Citibank is a banking school where you can learn a lot," El-Rifa'i said.

El-Barad'i's appointment was considered a revolutionary move, as leaders of state-owned banks were traditionally chosen from within those establishments. It was out of the norm that someone like El-Barad'i -- an "outsider" who worked for Citibank -- is asked to assume a top management position.

El-Barad'i's style of doing business was not completely welcomed in the beginning. With a reputation in the market as being a "butcher" who is tough and uncompromising with both clients and employees, his success in a bigger bank was in doubt. El-Barad'i opened the files of some of the "big" businessmen, who were thought to be untouchable. When it was revealed that many of them took unjustified loans and were not willing, or not able, to pay their debt, he resorted to court. In a few months, market heavyweights like Mohamed El-Garhy, Mustafa El-Beleidy and Ramy Lakah, fled the country.

El-Barad'i also tried to modernise the decrepit banking system and recruit a more dynamic staff. Despite many insiders' initial view that his hard-line attitude was not the best way to go about solving the banking sector's problems, it proved to be the appropriate policy for a sector submerged in corruption and complacency.

The International Monetary Fund was all praise for the changes El-Barad'i introduced. "The recent introduction of new, more market-oriented management in one of the banks is a welcome step and should be extended. We would recommend that this be regarded as a transition toward privatisation," the recent IMF annual report on the Egyptian economy said.

Egypt's four state-owned banks -- the National Bank of Egypt (NBE), Banque Misr, Banque du Caire and the Bank of Alexandria -- have historically dominated the banking sector. Although they still attract more than half of all loans and deposits, they no longer have the undisputed upper hand since the advent of liberalisation and privatisation of joint venture banks.

Market watchers are now holding their breaths in anticipation of similar management changes in the NBE, Egypt's largest bank, with nearly LE60 billion in deposits. In December Diaa Fahmy, who has been the bank's president for the past two years, will end of his one-year extension past retirement age. A renewal would allow him another year in the post, but the general leaning seems to be towards a change.

Private banks also made headlines with top brass reshuffles. The resignation of veteran banker Mahmoud Abdel-Aziz, chairman and managing director of the Commercial International Bank (CIB), Egypt's largest private bank, surprised all. The bank's board of directors in mid- August appointed Mahmoud Helal, the bank's deputy chairman as acting chairman, and Hisham Ezz El-Arab, the bank's deputy managing director as acting managing director.

Gamal Moharem, former Bank of New York's representative in Egypt, has been appointed president of Misr Commercial Bank. Hatem Sadek, former managing director of the Arab Bank, has become managing director of Misr International Bank (MIBank). Cairo Barclays former managing director, Wagdi Rabbat, who spent 22 years in Citibank in Europe and the Middle East, is now president and managing director of Misr Exterior Bank, replacing MP Abdallah Tayel, who now faces several allegations of corruption.

"I consider myself a doctor and the bank my patient," Rabbat said. "I need to perform certain operations and issue some prescriptions so the bank can regain its health. The most important thing is that the phase of uncontrolled loans has ended. A bank should have a rational and solid credit policy based on serious research of its clients."

Rabbat believes the banking sector has moved toward being more active and dynamic. "The new leadership is well- educated, open-minded and honest. The replacement is taking place for serious and appropriate reasons. The CBE leadership is also young and bright. They're all good signs," he said.

The list for reform, El-Rifa'i said, is long. Banks need to improve the quality of management, decision-making and its follow up, internal monitoring and training. "The CBE needs a lot of reform. The regulatory body should be strengthened and its quality upgraded to match the changes in banks. The CBE should focus more on monitoring the banking credit activities on a regular basis. The staff members of CBE's controlling and monitoring departments need intensive training and better remuneration packages," she said.

Three years ago, experts believed the country did not possess enough high-caliber bankers to replace the old brass. Today, a new generation of banking leaders has taken over with big plans for the future of banking in Egypt.

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