Governor of the Central Bank of Egypt (CBE) Tarek Amer renewed his demand to banks operating in the local market, both Egyptian and foreign, to help overcome the dollar crisis in the Egyptian market, in his meeting with banking leaders Wednesday.
Amer urged banks to seek to increase their foreign exchange resources, especially for banks suffering from deficiencies in their own resources. The CBE introduced new regulations 10 days ago for banks operating in the local market to obtain dollars through its FX Auction. The auction is held on Sundays, Tuesdays, and Thursdays of every week, and is the most prominent mechanism for banks to obtain dollar liquidity.
According to the new conditions, the obtaining of dollars is subject to how much these banks contribute to providing foreign exchange to the market.
Daily News Egypt interviewed renowned forex expert Mohamed Abdel Aal, Board Member of both the Suez Canal Bank and Arab Sudanese Bank, to discuss the reasons behind the regulations and their possible consequences.
What is the purpose of introducing new regulation on banks to obtain dollars from CBE’s auctions?
The CBE is trying out these regulations to urge the banks, not push them, to carry out their role in meeting their foreign exchange requirements through their own resources. This would ease the increasing and continuous pressure on the CBE to provide dollars, whereby it negatively impacts the foreign exchange reserves.
Are these regulations a mechanism for the CBE to know whether banks do not do enough to provide foreign exchange to their customers?
Actually, some banks, whether small or large, were unable to play the required or sufficient role in developing their foreign exchange own resources. Some just waited on the CBE’s auctions, in spite of the huge profits banks have achieved in general recently, which mainly came from the differences in currency prices and interest rates.
Do you expect the CBE to succeed in pushing banks to activate their own foreign exchange resources?
In my opinion, the CBE’s success in achieving this goal will be subject to the policies, procedures, and plans the banks may make to help them attract more foreign exchange.
How can this be achieved?
It can be done through a number of procedures, one of which is focusing on attracting the customers working in the exporting field and giving them top priority in granting the required funds to complete the cycle of production and exportation.
No less than 12%-15% of the loans portfolio in every bank can be allocated and compulsorily directed to fund small industries, especially since some industries complement and feed other industries that produce goods to export them or produce alternatives to imported goods. This is in addition to granting these loans with low commissions, giving these companies good prices, and giving priority in terms of providing them with the foreign exchange needed for importing the raw materials.
Banks operating in the Egyptian market also have to seek to increase the limits of obtaining loans from the banks and correspondent banks abroad. They also have to work on increasing the limits of the credit used in funding the importing operations.
Banks can increase their foreign exchange resources through innovating new products or following new policies to encourage Egyptians abroad to transfer their savings to them. That is in addition to convincing them to give up their savings in foreign exchange inside the banking system.
There are huge efforts to attract transfers of Egyptians abroad to banks, but the percentage of these transfers is still small. How can banks attract more transfers?
I have a number of suggestions that can help in attracting these transfers to banks, one of which is to create a model for an exchange contract between the banks and Egyptians working abroad who wish to give up their savings in foreign exchange. This suggested exchange contract would grant the customer the right to buy back part of or the entire amount they sold to the bank through the official price applied in the bank in case they needs to.
Moreover, the transfers’ accounts of the Egyptians working abroad can be exempted from the restrictions on foreign exchange withdrawals and deposits currently applied by the CBE.
The banks can also work as the agent for customers working abroad in real estate purchases. This will eliminate the difficulties and problems the client may face while dealing with the different bodies in Egypt. Moreover, banks can expand cooperation agreements with banks in Gulf countries, money transfer companies, and the exchange firms to acquire obligatory shares in the transfers from workers there.
Are there other methods for banks to benefit from developing their dollar resources?
It is necessary to look for new joint means between the banks, the Capital Market Authority, and the investment banks to activate launch of different investment funds in foreign currencies with attractive prices. These funds need to be promoted locally and abroad and the government must guarantee transferring their capital and profit to abroad to customers who invested in them at the date of maturity.
Finally, banks must make use of part of their tremendous profits from investing in the securities and direct them to support marketing means, mechanisms, and activities that can attract foreign currency. This includes offering good prices and commissions to buy foreign currencies from export and the transfers of Egyptians working abroad.