Issue No. 610
Economy
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31 Oct. - 6 Nov. 2002 Issue No. 610 Economy |
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| Published in Cairo by AL-AHRAM established in 1875 | Recommend this page | ||
CBE meets the press
THE CENTRAL Bank of Egypt (CBE)is toughening its supervision of Egyptian banks. According to CBE governor, Mahmoud Abul-Oyoun, it will soon be issuing a new set of regulations governing credit, following approval by the CBE's board of directors. However, in spite of these measures, the CBE governor stressed that Egypt's banking sector is safe and sound.
Speaking at a meeting this week with the press, he said that the procedures that have been taken are corrective measures and they will not hamper the operations of the banking sector. "What the banking sector is witnessing these days should be viewed as an attempt to clean the files. We are strengthening our ability to face crisis."
Abul-Oyoun pointed out that it's not easy for an economy to suffer a liquidity crisis and recession without businesses being affected. "Every project has been affected by the conditions of the market." Although he refused to be specific about defaults, he did say that "it's changing every second". However, he stressed that the defaults are not beyond the ability of the banking sector to absorb. "The defaults will not cause any losses to banking institutions. Even any bankruptcy cases that banks may face, will not affect their performance if they follow CBE directives on loan-loss provisions."
To remind banks of CBE directives with respect to credit, the directives of the CBE's Credit Supervision Department are being reprinted. They will be ready during November and distributed to the smallest branch of every bank. The CBE is also working on wiring itself to banks via a network. Initially, banks will be able to access all CBE information. At a later stage they will be able to input information as well. That should provide banks with much needed information to make a sound credit decision.
While speaking at length on defaults, Abul-Oyoun was abrupt when it came to answering questions on the exchange rate. He said that there is no reason to justify a further devaluation of the pound. Referring to recent statements by Prime Minister Atef Ebeid, he stated that Egypt's revenues and expenditures are on par with each other. The exchange rate of the pound to the US Dollar recently reached LE5.20 on the black market due to demand by pilgrims going to Saudi Arabia for the Omra. The value of the pound had previously been stable at around LE4.70.
The issue of interest rates and how they can be reduced to stimulate demand. Abul-Oyoun said that interest rates were liberalised in 1992 and since then the CBE has had no direct say on their level. However, he said that the CBE attempts to affect the interest rate indirectly through controlling the amount of money exchanged in the market. "We have started accepting one- week and two-week deposits which is unprecedented. In the future there will also be one-day deposits and loans." These will be the benchmark for the interest rate.
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