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Maximum income for public banks opposed by sector - Daily News Egypt

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Maximum income for public banks opposed by sector

Bankers express concern that public bank maximum wage law will push talent away to private sector

By Doaa Farid

The National Council for Wages is considering exempting public banks from a proposed maximum wage law, AlBorsa newspaper reported earlier this month, amid ongoing debate and opposition to the law since its original proposition in 2011.

Hany Mahmoud, the managing director and CEO of Blom Bank Egypt asserted that any sector depending on the presence of expertise and competitiveness such as banking should not be restricted by a maximum wage.

Mahmoud said every day the leadership of banks are expected to make the right decisions over investments, strategy, loans to achieve its goals and maintain competitiveness. “Any sector that includes financial decisions that will affect its performance should attract the expertise and focus based on their strategy; not on wages,” he said.

“If public bank officials have another private place pays more for them, they will definitely leave the public banks,” said Mahmoud, adding that this would cause a migration of talent and capabilities.

Mahmoud said that if the law is implemented on banks, it would weaken the public sector in the interests of saving money, which he said “makes no sense.”

At a time when the government is suffering from a 14% of GDP budget deficit, which it is aiming to reduce to 9.1%, the current cost of wages and compensations borne by the state allots EGP 141bn from its budget, representing a 14.8% increase from the preceding year.

In December 2011, then-Prime Minister Kamal El-Ganzouri announced the implementation of maximum wages in the public and private sector at 35 times the minimum wage, starting in January 2012, with exemptions for the banking and petroleum sectors. However, the Supreme Council of the Armed Forces (SCAF) issued a decree a week later setting the maximum wage at EGP 50,000, in contrast to the previous decision by Ganzouri, leaving some confusion over the law’s parameters.

Both decisions were set to be implemented in January 2012, but were not carried out.

However,  former Finance Minister Momtaz El-Saeed said in February 2012 that maximum wages will be implemented in public banks linked to the minimum wage in the banking sector, which he said would be “much higher than the [minimum wage] for public administration.”

Haytham Abdel Fattah, treasury manager at Industrial Development Bank, opposed the maximum wage not just the banking sector, but all sectors, calling it an “injustice for competencies which are already rare in the public sector.”

“If an official managed to bring in, for example EGP 2m as a profit, how come he will be paid only EGP 50,000? The criteria in the public banks should be the capabilities of the officials only,” Abdel Fattah said, calling it “unwise for a developing country,” to apply this law.

The National Council for Wages pledged in August to formulate a national wage policy linking wages and pensions to living standards.

Prime Minister Hazem El-Beblawi announced in a press conference in September that the cabinet’s decision to set minimum income at EGP 1,200 is to be implemented starting January 2014.

The Central Bank of Egypt had in 2011 submitted to the government and SCAF a draft law for banks, under which public banks must disclose the sum of salaries of their officials. The law did not include a minimum or maximum wage for banking employees.

Abdel Fattah added that the minimum wage is crucial to maintain social justice, but maximum wages are “unfair.”

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