Sunday,24 February, 2019
Current issue | Issue 1368, (9 - 15 November 2017)
Sunday,24 February, 2019
Issue 1368, (9 - 15 November 2017)

Ahram Weekly

More public forex companies

The public-sector banks are opening foreign-exchange companies to help regulate the market, writes Safeya Mounir

Exchange companies owned by public-sector banks will expand their outreach
Exchange companies owned by public-sector banks will expand their outreach

Egypt’s public-sector banks have announced plans to increase the number of their foreign-exchange bureaus to help better control foreign currency transactions. 

The National Bank of Egypt (NBE), Egypt’s largest state-owned bank, announced at the end of August that it was opening two bureaus in Nasr City. The bank said the bureaus were the start of a chain that would be located in Cairo, Alexandria and around the Suez Canal.

 Some 50 bureaus under the name of Al-Ahly Foreign Exchange are expected to open within the next three years to guarantee a reasonable share of the market.

Vice President of the NBE Mahmoud Montasser said at the launch of the bank’s exchange company that the idea had come due to the condition of the foreign currency market before last year’s decision to float the pound. It aimed to “regulate the market and restore balance”, and it was for this reason that the bank had taken steps to create the company, he said. 

In mid-September, chairman of Banque Misr Mohamed Al-Atribi announced that the number of Misr Exchange bureaus owned by the bank would increase from 14 to 50 within a year. 

Ahmed Selim, a banking expert, said exchange companies owned by the public-sector banks would expand the outreach of such bureaus to more clients. This would increase further when the private banks were allowed to do the same, he added. 

Even if the latter were not allowed to open foreign-exchange companies, the presence of those owned by the public-sector banks would strike the needed balance in the forex market as despite the foreign exchange liberalisation there were still foreign currencies being exchanged on the parallel market, Selim said.

Ali Al-Hariri, secretary of the foreign exchange division at the Cairo Chamber of Commerce, said the bank-owned exchange companies would not impact independent firms since the newcomers would operate like the existing ones and exchange at the rates used by the banks.  

“Each company has its own clients,” Al-Hariri said. “A client who is used to dealing with one company is not likely to go elsewhere.”

He noted that since the decision to free the exchange rate one year ago, transactions by individuals had dropped. “Before the floating of the pound, customers came to us to buy foreign currency and the exchange offices delivered foreign currency to the banks on a daily basis. Now, clients go to the bank to buy foreign currency and don’t give us their money.”

Al-Hariri also said that more bureaus would ignite competition in a market that was already suffering from low profits. He explained that exchange companies never make more than a few piastres per currency, with the Saudi riyal having the lowest margins.

He added that in the past each foreign-exchange company would decide its own profit margins for each currency, but today the banks decided the profits by themselves and dictated them to the exchange companies. 

The Central Bank of Egypt (CBE) has shut down 53 exchange bureaus since the floatation of the pound for trading at black market rates and other violations. Twenty-seven were closed for between three and 12 months.

In early August, parliament adopted harsher penalties for foreign currency transactions outside official channels, including imprisonment of between six months to three years and fines of between LE1 and LE5 million.

Al-Hariri told Al-Ahram Weekly that transactions at private exchange companies were now mostly limited to Egyptians returning from overseas exchanging foreign currencies into Egyptian pounds.

The writer is a freelance journalist.

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